Serious question about Auditing the Fed.

[TakeAStepBack]

This latest financial crisis was caused by rampant fraud, unregulated derivatives, and massive overleveraging. Every bit of which is still occuring.

The crash had very little to do with the Fed. The Fed's role was keeping interest rates too low for too long. But that is a very minor part in the Big Picture.

Well, I was paying you attention until this.

You do realize that the low interest rates signaled lending power, right? That lending power, coupled with govt. GSEs pushed the credit into places it should have never gone. Without the low interest rates and the expansion of credit to people who should not have attained it, there would have been no bubble to burst in the first place. The federal reserve is the MAIN culprit in the financial crisis of 2008. Without their policy, no boom. No bust.

 

[TakeAStepBack]

1873, 1884 and 1893.

Ah, "then crime of 73". This one is easy. The German empire stopped minting silver thalers, which created a price suppression on silver, and the mining industries, in the western nations. including the US. Which led to the coinage act of 1873. Which essentially moved us off silver and to an exclusive gold standard. It was the direct results of government interventions that caused this to happen. Both foreign and domestic.

I'll do the other two when i have more time. Marked for later....

1884 was really a continuation of what happened in 73. You have to look at the economics of the time frame, this particular "panic", was what I'll call a "long wave from the ripple". In this instance, and part of a larger economic distortion caused by government by aiding the transport industry through loans and land acquisitions. When the massive slow down on these projects commenced, raw material demand, labor and other gave out. Causing what some refer to as an "industrial depression".

This is government allocating resources at an unnatural base and distorting the economic growth of a nation.

 

[TakeAStepBack]

1893 - Yet more continuation of 1973. Overblown railroad companies folding in, gold was scarce, silver not legal tender. You can get the drift here by now I am sure.

 

[g5000]

This latest financial crisis was caused by rampant fraud, unregulated derivatives, and massive overleveraging. Every bit of which is still occuring.

The crash had very little to do with the Fed. The Fed's role was keeping interest rates too low for too long. But that is a very minor part in the Big Picture.

Well, I was paying you attention until this.

You do realize that the low interest rates signaled lending power, right? That lending power, coupled with govt. GSEs pushed the credit into places it should have never gone. Without the low interest rates and the expansion of credit to people who should not have attained it, there would have been no bubble to burst in the first place. The federal reserve is the MAIN culprit in the financial crisis of 2008. Without their policy, no boom. No bust.

Financial derivatives are disaster force multipliers. If the problem was just too many people getting home loans, this would have been far more easily contained. That's why all the politicians and prognosticators of the time predicted a "soft landing", including the SecTreas.

Schiff gets credit for being one of the few who predicted a hard landing, but he lost his credibility a year later when he died on a cross of gold.

I do hold Greenspan culpable, but even Greenspan came to realize and admit his Libertarian belief system was wrong, and that admission had nothing to do with the interest rate and everything to do with the belief that Wall Street would police itself.

This was not a subprime bubble. This IS a derivatives bubble. This is about far, far more than home loans. The situation in Europe is just another face of the same bubble. It amazes me that people have yet to connect the dots and fail to see the big picture.

 

[TakeAStepBack]

You're looking at the conduit of hedging as the problem.

 

[LibertyForAll]

Who has the constitutional authority to issue currency? The federal government, right? Who do they answer to? The people, right? Who represents the people in our government? Congress right? So who should monitor our currency and the policies surrounding it? Congress in thier role as representatives of the people. It's very simple. This idea that congress is a separate entity from us is what causes a lot of the issues we have today. We need to make them remember what their role is and it is not to be a member of an elite class of self serving politicians.

The very fact that the fed is resisting the audit should be the first clue that it is absulutely necessary.

 

[8537]

1873, 1884 and 1893.

Ah, "then crime of 73". This one is easy. The German empire stopped minting silver thalers, which created a price suppression on silver, and the mining industries, in the western nations. including the US. Which led to the coinage act of 1873. Which essentially moved us off silver and to an exclusive gold standard. It was the direct results of government interventions that caused this to happen. Both foreign and domestic.

I'll do the other two when i have more time. Marked for later....

I'm really trying to make sure I understand this: Moving us from a bimetallic standard to the international / worldwide gold standard (an orderly process coordinated between nations to foster trade) caused a financial panic? I'm not sure a reduction in the money supply fits the model as a cause of a depression - Under the classical model, this would simply be deflationary. It's difficult to explain how a crisis in Germany led to banks failing in the US if said banks were based on hard money.

 

[8537]

1893 - Yet more continuation of 1973. Overblown railroad companies folding in, gold was scarce, silver not legal tender. You can get the drift here by now I am sure.

If gold was scarce, why didn't the price of gold (measured in the amount of good and services it could purchase) increase?

 

[TakeAStepBack]

1873, 1884 and 1893.

Ah, "then crime of 73". This one is easy. The German empire stopped minting silver thalers, which created a price suppression on silver, and the mining industries, in the western nations. including the US. Which led to the coinage act of 1873. Which essentially moved us off silver and to an exclusive gold standard. It was the direct results of government interventions that caused this to happen. Both foreign and domestic.

I'll do the other two when i have more time. Marked for later....

I'm really trying to make sure I understand this: Moving us from a bimetallic standard to the international / worldwide gold standard (an orderly process coordinated between nations to foster trade) caused a financial panic? I'm not sure a reduction in the money supply fits the model as a cause of a depression - Under the classical model, this would simply be deflationary. It's difficult to explain how a crisis in Germany led to banks failing in the US if said banks were based on hard money.

Because the mining industry, and market participants who were unable to secure silver as a mode of exchange. It was the german empires discontinued minting of thalers, because Otto Von got a huge sum of gold from France and felt it no longer needed, led to the coinage act of 1873. That act, demonetized silver. Forcing participants into gold only. It seems fairly obvious that this would cause economic calamity.

And in 1893, the free silver campaign began. because silver was the exchange tool of the lesser fortunate class. Where goods and services were not able to procure a gold amount as a price point. There was silver. Then govt. decided silver shouldn't be a unit of exchange as legal tender. Government, not a free market place, created this depression. 1893 saw silver come back in a round about way.

 

[TakeAStepBack]

1893 - Yet more continuation of 1973. Overblown railroad companies folding in, gold was scarce, silver not legal tender. You can get the drift here by now I am sure.

If gold was scarce, why didn't the price of gold (measured in the amount of good and services it could purchase) increase?

Good question! The contraction of the money supply by the loss of silver as money in 1873, did see the purchasing power of gold had risen by 23% through this time frame (from roughly 1846 - 1894). While the purchasing power of silver declined over 50%.

 

[TakeAStepBack]

You can read more about it from the Journal of political economy, Here

 

[8537]

Ah, "then crime of 73". This one is easy. The German empire stopped minting silver thalers, which created a price suppression on silver, and the mining industries, in the western nations. including the US. Which led to the coinage act of 1873. Which essentially moved us off silver and to an exclusive gold standard. It was the direct results of government interventions that caused this to happen. Both foreign and domestic.

I'll do the other two when i have more time. Marked for later....

I'm really trying to make sure I understand this: Moving us from a bimetallic standard to the international / worldwide gold standard (an orderly process coordinated between nations to foster trade) caused a financial panic? I'm not sure a reduction in the money supply fits the model as a cause of a depression - Under the classical model, this would simply be deflationary. It's difficult to explain how a crisis in Germany led to banks failing in the US if said banks were based on hard money.

Because the mining industry, and market participants who were unable to secure silver as a mode of exchange. It was the german empires discontinued minting of thalers, because Otto Von got a huge sum of gold from France and felt it no longer needed, led to the coinage act of 1873. That act, demonetized silver. Forcing participants into gold only. It seems fairly obvious that this would cause economic calamity.

And in 1893, the free silver campaign began. because silver was the exchange tool of the lesser fortunate class. Where goods and services were not able to procure a gold amount as a price point. There was silver. Then govt. decided silver shouldn't be a unit of exchange as legal tender. Government, not a free market place, created this depression. 1893 saw silver come back in a round about way.

'Tis a great discussion. I wish I had time for a full reply at the moment, but it will have to wait....

Rarely do discussions on this forum actually deal in substantive economics. Nice to have one.

Edit to add: And i LOVE the fact that the journal article is from 1896. God Bless the interwebs...hell of a find.

 

[Dante]

The Fed is already audited.

What those who want to "audit the Fed" really want is to audit the decisions of the FOMC. This is a terrible idea because it will increase political interference in monetary policy. Why in God's name do we want Congress meddling in the Fed's affairs?

 

[Shelzin]

I'm not an economist, so I don't understand most of what I have heard about this issue. I am a Libertarian and it has been a part of the LP platform for quite a while.

I see you saying that... But I see no evidence to back that up other than you saying it.

1. Do you think the Federal Reserve needs to be audited and why?

I believe that every branch of government should "audit" the other two branches. What the Fed does is the irresponsibility of congress given that's who gave the Fed it's powers, thus giving it's own power to an outside source.

2. Do you think that the Fed and Bernanke are doing a good job with it?

The question is irrelevant. The Fed has the ability to print money and bail out companies/banks in other nations without oversight. How can we know that the Fed is doing it's job in an honest manner without visibility? Hell... How can we know it's doing it's job at all?

3. Are you not concerned about who will do the auditing?

Of course. But then I'm of the opinion that you just don't bother to let someone audit them... You just post all transactions the Fed makes in behalf of the US government to anyone that wants to see them. Is there some point to keeping it secret?

 

[TakeAStepBack]

Yes, the point of keeping it a secret is that the entire system is built on confidence in the feds abilities, shrouded in secrecy. If a true audit turned up showing them makinng wreckless mistakes, it could undermine their authority. This would cause a systemic collapse int eh house of cards confidence system. Not just domestically, but world wide. We are the reserve fiat currency of the world.

The federal reserve needs its secrecy to maintian authority. Which as it turns out, is waning anyhow. But that was inevitable. No system built in the this manner can last. It's simply math.

 

[Shelzin]

Yes, the point of keeping it a secret is that the entire system is built on confidence in the feds abilities, shrouded in secrecy. If a true audit turned up showing them makinng wreckless mistakes, it could undermine their authority.

Sounds like a something from the medieval ages where a King is all mighty. Don't question... Just do. Silly serfs don't know what's best for you.

This would cause a systemic collapse int eh house of cards confidence system. Not just domestically, but world wide. We are the reserve fiat currency of the world.

I'm still wondering what is going to happen with the Euro and the Dollar actually become the same value with one another.

The federal reserve needs its secrecy to maintian authority. Which as it turns out, is waning anyhow. But that was inevitable. No system built in the this manner can last. It's simply math.

Think it'll give it's power to a world bank?

 

[TakeAStepBack]

They will just conduct more currency/trade wars to offset the difference. One of the reasons why Brazil is pissy with us is because we constantly push their currency higher by debasing our own. This causes them a trade deficit and makes their international goods on exchange in less demand.

Brazil is not the only one who gets caught in this game with currencies.

 

[Shelzin]

They will just conduct more currency/trade wars to offset the difference. One of the reasons why Brazil is pissy with us is because we constantly push their currency higher by debasing our own. This causes them a trade deficit and makes their international goods on exchange in less demand.

Brazil is not the only one who gets caught in this game with currencies.

And if we were all using the same currency... that gets fixed.

Please understand... I'm not for a single world currency... But it seems as if the western governments of the world are creating and maintaining problems to make it the only logical solution to solve it's problems.

 

[Dante]

Who has the constitutional authority to issue currency? The federal government, right? Who do they answer to? The people, right? Who represents the people in our government? Congress right? So who should monitor our currency and the policies surrounding it?

If Congress creates an entity to monitor something...?

What is it that puzzles you?

Congress in thier role as representatives of the people. It's very simple. This idea that congress is a separate entity from us is what causes a lot of the issues we have today.

Classic. Ron Paul followers, Tea Party Imbeciles, and others have been denigrating Washington (the Government) as a separate entity hostile to the people.

You reap what you sow.

now stfu

 

[Dante]

They will just conduct more currency/trade wars to offset the difference. One of the reasons why Brazil is pissy with us is because we constantly push their currency higher by debasing our own. This causes them a trade deficit and makes their international goods on exchange in less demand.

Brazil is not the only one who gets caught in this game with currencies.

Imagine that. A nation looking out for it's own interests. It's a blow against the free markets!