Credible Argument for Keeping the Fed

[Kevin_Kennedy]

Is it your claim that the century that preceded 1913 had fewer panics and financial collapses?

Not less, but none were comparable to any of the ones listed. However, we can point to the government tampering with the interest rates that caused those panics before the Fed, just as the Fed does now.

The panic of 1837 was far worse than the 1970's. 1873 and 1901 were worse still. And 1907 was even worse.

Did they last as long?

 

[Kevin_Kennedy]

Who cares. The immediate affect is meaningless. The only effect we feel is from loss of value of savings, but when inflation is high over a period of time growth is greater and interest bearing accounts offset losses to savings. Owners of land and homeowners benefit from inflation as the mortgage loan (if there is one) becomes smaller in comparioson to the resale value. I'd rather see some inflation rather than zero inflation. We're not in charge of control of the world economy, and a lot of our inflation comes from our participation in a world economy. Better fiscal management could overcome the problems we experience; poor fiscal management drives poor monetary policy.

High inflation doesn't cause growth, it causes bubbles.

Isn't the converse actually the case?

No, because inflation is defined as the increase in the supply of money. So as interest rates are kept artificially low through inflation malinvestment begins to occur which causes a bubble which must ultimately go bust.

 

[American Horse]

High inflation doesn't cause growth, it causes bubbles.

Isn't the converse actually the case?

No, because inflation is defined as the increase in the supply of money. So as interest rates are kept artificially low through inflation malinvestment begins to occur which causes a bubble which must ultimately go bust.

Inflation is caused by, but is not the definition of increase in the money supply. But I'll cede the point, because in that scenario they are one in the same. However, as you know, inflation can exist, and often does, without an increase in the money supply.

As to the effects of inflation;

The elderly can benefit, because the basket of goods they need to survive is limited, and can be adjusted, and their savings can earn interest premiums in savings, the safest place to store their money. They can also pay back old mortgage dollars with inflated new dollars, and their medical, at least hospital benefits are secure with Medicare, while their real property values are remaining constant.

Young adults are hurt more because they may not yet have any significant savings to shelter in higher interest bearing instruments, and they are spending their limited income less discriminately securing their survival on items like gasoline needed to get to work, auto repairs and maintenance, rent on a residence to maintain relocation flexibility, while homes they might purchase are increasing in price, along with mortgage rates increasing, medical costs to stay healthy to maintain their working position increasing. Still if they hang in they are being driven to compete in the contest for survival which has character building benefits. But maintaining location flexibility can be worth a lot to secure opportunities that would otherwise be foregone when tied to a home with mortgage.

Middle age folks are in a better position to benefit because real property prices are more dynamic and they are in a better position to sell high and buy low if they buy distressed inventory, which is more common in inflationary periods.

I’m not very certain of the relative weight of the above components, but having been in all those demographic groups, I have benefitted more significantly from inflation than been hurt by it.

Your opinion?

 

[WatertheTree]

Isn't the converse actually the case?

No, because inflation is defined as the increase in the supply of money. So as interest rates are kept artificially low through inflation malinvestment begins to occur which causes a bubble which must ultimately go bust.

Inflation is caused by, but is not the definition of increase in the money supply. But I'll cede the point, because in that scenario they are one in the same. However, as you know, inflation can exist, and often does, without an increase in the money supply.

As to the effects of inflation;

The elderly can benefit, because the basket of goods they need to survive is limited, and can be adjusted, and their savings can earn interest premiums in savings, the safest place to store their money. They can also pay back old mortgage dollars with inflated new dollars, and their medical, at least hospital benefits are secure with Medicare, while their real property values are remaining constant.

Young adults are hurt more because they may not yet have any significant savings to shelter in higher interest bearing instruments, and they are spending their limited income less discriminately securing their survival on items like gasoline needed to get to work, auto repairs and maintenance, rent on a residence to maintain relocation flexibility, while homes they might purchase are increasing in price, along with mortgage rates increasing, medical costs to stay healthy to maintain their working position increasing. Still if they hang in they are being driven to compete in the contest for survival which has character building benefits. But maintaining location flexibility can be worth a lot to secure opportunities that would otherwise be foregone when tied to a home with mortgage.

Middle age folks are in a better position to benefit because real property prices are more dynamic and they are in a better position to sell high and buy low if they buy distressed inventory, which is more common in inflationary periods.

I’m not very certain of the relative weight of the above components, but having been in all those demographic groups, I have benefitted more significantly from inflation than been hurt by it.

Your opinion?

Well my opinion is that your opinion of inflation being benificial to the elderly is totally false. They are not protected from anything by social security. There checks stay the same while prices rise. We like to lie about inflation rate in this country, so even if they get a cost of living increase it does not offset.

The last time I checked a 10 year bond was the only savings method at my bank that came anywhere close to inflation. So as usual, when a country is inflating the money supply ALL savings lose.

The bottom line is when a country inflates its currency there is only two groups of people that benifit, at the expense of everyone else. The first group is people drowning in debt like all governments that choose to inflat money. Just like the governments debt that money loses value as the money supply is inflated. The other group of people that benifit is the unemployed. That new money does enter the economy (even though I dont believe in trickle down, and currently corporate greed is keeping most of it). That money does fuel jobs.

So to sum it up. When a currency is inflated the winners are anyone holding debt, or anyone with no assets and is not already working.

Now about the losers. Losers are the savers because of above mentioned reasons. Losers are working people who already have jobs, because they will not recieve raises to keep up with the inflation. Losers are people on a fixed income, for the same reason.

So we reward bad behavior, and punish good. And we wonder why the muslims hate us, why our economy is in the toilet, and why corruption is as common as a neck tie, and why we have people sitting in on wall street.

 

[C_Clayton_Jones]

The other option is to allow Congress to determine the money supply. That's a wrap.

Correct:

The Fed threw us a rope; we don't want Congress holding it

When the professionals at the Federal Reserve Board review the epic diary of our economy, their lament must be “How soon they forget.” It has been 30 years since America was in the grip of double-digit inflation, with seemingly no hope of escape. The professionals look back with justifiable pride on the brave ac*tions of the Fed under Chairman Paul Volcker. Memorably, it raised interest rates to nearly 20 percent. Unemployment rose. The political firestorm was more turbulent than any*thing since the days of Herbert Hoover and the Great *Depression. But the Fed’s extraordinary action broke the back of the “Great Inflation,” launching us into the “Great Moderation,” a 25-year pe*riod of high employment and prosperity with very limited inflation.

This was an exemplary illustration of Federal Reserve independence. Imagine if Congress had called the shots. Can anyone believe it would have acted with such reso*lution—and in an election year?

The Fed just has to be protected. If glob*al financial markets came to believe that political pressure was determining mone*tary policy, there would be dangerous con*sequences. The markets would reckon that inflation in the United States would lead to higher interest rates. There would be greater downward pressure on the dollar—and given the deficit we are facing, a run on the dollar would be disastrous.

We must preserve the Fed’s historic and crucial insula*tion. Sen. Judd Gregg of New Hampshire sums it up aptly: “Congress has demonstrated time and again its inability to manage the nation’s fiscal policy, illustrated by our stag*gering national debt in excess of $12 trillion, so how could anyone think that its involvement in monetary policy would be good for the country?”

When we fell off the cliff, the Fed threw us a rope. While we are being hauled back up, along comes a busybody who says, “Give me the rope . . .” No thanks!

Mort Zuckerman: Keep Congress Away From the Federal Reserve - US News and World Report

Can you imagine this Congress, this House, managing monetary policy? That would be an unmitigated disaster.

You mean like our constitution says? Maybe if it was still their job we could expect better qualified politicians? At that point people like Ron Paul become very appealing becuase they actually have a clue what theya re talking about.

The Constitution doesn’t ‘say’ anything; all that matters is the Court’s interpretation:

The Supreme Court had its say on the matter in McCulloch v. Maryland (1819). It voted 9-0 to uphold the Second Bank of the United States as constitutional. The Court argued with the doctrine of implied powers, stating that to be ‘necessary and proper’ the Bank needed only to be useful in helping the government meet its responsibilities in maintaining the public credit and regulating the money supply. Chief Justice Marshall wrote, “After the most deliberate consideration, it is the unanimous and decided opinion of this court that the act to incorporate the Bank of the United States is a law made in pursuance of the Constitution, and is part of the supreme law of the land” (Hixson, 117). The Court affirmed this opinion in the 1824 case Osborn v. Bank of the United States (Ibid, 14).

Therefore, the historical legal precedent exists for Congress' power to create a central bank. It formed the Federal Reserve system in 1913 to perform many of the same functions as its predecessors. As before, the courts have agreed that a central bank, and the Federal Reserve in particular, is constitutional.

PublicEye.org - The Website of Political Research Associates

Thus, in response to the OP’s question: the Fed is necessary to ensure monetary policy is not subject to capricious partisan dogma and the Court has ruled the Fed is Constitutional. The Fed is an appropriate manifestation of a modern, 21st Century economy.

 

[bripat9643]

The other option is to allow Congress to determine the money supply. That's a wrap.

The other option is called "free banking." It worked great in this country until the Civil War.

 

[The T]

The other option is to allow Congress to determine the money supply. That's a wrap.

The other option is called "free banking." It worked great in this country until the Civil War.

And strangely enough preferred by the Founders that opted for NO Central banking authority.

They foretold what WE are experiencing now thanks to the asshat Progressives 100 years ago.

 

[Againsheila]

The Fed has a responsibility to maintain the value of the currency. The "dollar" is the stock in trade of the Fed and they no more want to create new dollars than does a corporation to issue new stock, because the net affect is to devalue or erode their stock in trade. If it weren't for the existence of the Fed, both monetary and fiscal policy would be in the province of the politicians, and if you think we can trust them to be responsible managers of both fiscal and monetary policy, I've got a bridge to sell you, because they have been fiscal failures.

If not for the Fed, our dollars would be backed by gold. Now they're backed by nothing more than the word of our lying politicians.

 

[Toddsterpatriot]

I dont have one, thought maybe someone else would.

Lender of last resort.

 

[Mr Liberty]

The other option is to allow Congress to determine the money supply. That's a wrap.

It is their constitutional responsibility. Also they should follow the constitutional mandate of 371.25 grams of silver for every dollar. Hmm. That means I would be making only $1.00 per hour: however a tank of gas would cost about $1.50, a weeks worth of groceries would cost only $2.25 and I would not have to pay any income taxes. Imagine no inflation means that saving money will actually make sense.

 

[Toddsterpatriot]

The other option is to allow Congress to determine the money supply. That's a wrap.

The other option is called "free banking." It worked great in this country until the Civil War.

And strangely enough preferred by the Founders that opted for NO Central banking authority.

They foretold what WE are experiencing now thanks to the asshat Progressives 100 years ago.

Ummmm....the Founders created our first central back under George Washington.

 

[Toddsterpatriot]

The other option is to allow Congress to determine the money supply. That's a wrap.

Allow the guys who ran up our insane debt to also control monetary policy?

 

[Toddsterpatriot]

The other option is to allow Congress to determine the money supply. That's a wrap.

That's exactly what I think....I find it ironic that libertarians want to give more power to federal government.

That last thing we need is politicians, who aren't always experts on monetary policy, playing politics with interest rates..

Except that's not the only option, and not what libertarians want to do. We want to let the market set interest rates, not the Congress. Letting Congress set them would still be central planning and would still cause bubbles.

We want to let the market set interest rates

Except for overnight rates, the market does set interest rates.

 

[Toddsterpatriot]

No, the market would...just like it does the price of everything else.

The big Banks would have the control of the money supply, and in the free market, they don't have to act in America's best interest, but in their own best interest.

You think GS having all the say when it comes to money is in our best interest?

You either have an oligarchy controlling everything, government, or a hybrid of private sector and qualified economist civil servants like the fed....imo the fed would be the choice.

Not if you had competing currencies.

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

 

[CT9]

The other option is called "free banking." It worked great in this country until the Civil War.

And strangely enough preferred by the Founders that opted for NO Central banking authority.

They foretold what WE are experiencing now thanks to the asshat Progressives 100 years ago.

Ummmm....the Founders created our first central back under George Washington.

Guy if you are comparing the First Bank to the Federal Reserve we have now you have a very shallow knowledge of history. I suggest reading up on it.

 

[CT9]

The big Banks would have the control of the money supply, and in the free market, they don't have to act in America's best interest, but in their own best interest.

You think GS having all the say when it comes to money is in our best interest?

You either have an oligarchy controlling everything, government, or a hybrid of private sector and qualified economist civil servants like the fed....imo the fed would be the choice.

Not if you had competing currencies.

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

Competing currencies would never happen, although it is not explicitly written in the Constitution, the way the Constitution is written makes it unconstitutional.

I'm not sure why it was even brought up what a dumb idea.

 

[WatertheTree]

And strangely enough preferred by the Founders that opted for NO Central banking authority.

They foretold what WE are experiencing now thanks to the asshat Progressives 100 years ago.

Ummmm....the Founders created our first central back under George Washington.

Guy if you are comparing the First Bank to the Federal Reserve we have now you have a very shallow knowledge of history. I suggest reading up on it.

I dont think he knows anything about monetary policy or where money comes. Otherwize he would have a reasonable argument for keeping the fed.

Instead he has as many one liners as a rapper.

 

[Contumacious]

The Feds been around for a long time, and America's had a nice run with it...Why now is it so crucial to get rid of it?

You think it makes sense to give more power and responsibility to government that can't even pass a budget?

A very nice run. Panic of 1920, the Great Depression, stagflation of the 1970's, dot-com bust, and the 2008 recession to name the big ones.

Is it your claim that the century that preceded 1913 had fewer panics and financial collapses?

Prior to 1913 there were panics induced by the federal government mismanagement but they were limited to certain industries or geographical regions.

.

 

[Toddsterpatriot]

And strangely enough preferred by the Founders that opted for NO Central banking authority.

They foretold what WE are experiencing now thanks to the asshat Progressives 100 years ago.

Ummmm....the Founders created our first central back under George Washington.

Guy if you are comparing the First Bank to the Federal Reserve we have now you have a very shallow knowledge of history. I suggest reading up on it.

I was responding to the claim the founders "opted for NO Central banking authority". Clearly they did opt for a central bank.

 

[Mr Liberty]

Not if you had competing currencies.

Competing currencies? Great idea. How many should we have? What if your boss paid you with one but your mortgage was in another? How many separate bank accounts will you need?

Competing currencies would never happen, although it is not explicitly written in the Constitution, the way the Constitution is written makes it unconstitutional.

I'm not sure why it was even brought up what a dumb idea.

I remember holding a silver certificate, it was not a federal reserve note. I could exchange it for a silver dollar. Made of real silver, not the nickel copper money we use today.
We have had competing currency before.

Bank accounts, mortgages, wages, and anything else can easily be tracked in both federal reserve and silver money at their exchange rates.

The Federal Reserve system is fraud. All fractional lending is fraud. A farmer cannot sell more corn futures than he owns. If he did he would go to prison. Only a bank can lend money he doesn't possess. They make money out of thin air and you don't see anything wrong with this.

The TARP (our money) was given to the banks. What did they do with it? I have been looking but, I can't find the answer. Why don't we know?

I entered the work force in 1975 and long before I started, the Federal Reserve and their partner the Federal Government, have gradually and systematically robbed me and my countrymen of our economic liberty. They have created a soft tyranny that soon may become very hard. Liberty is not a spectrum. It doesn't have degrees or types. You either have it or you don't. We do not have economic liberty. We are not free. Whatever freedoms you think you have are illusionary. We are tax slaves. Don't believe me. Stop paying them.

Since the beginning of the financial crisis the FED has increased the money supply by 120% and they are not done. This is a housing bubble and it has not finished deflating. The banks will be in trouble again soon and will get another bailout. This will continue until the value of the dollar reaches zero and joins the continental.