Why We Have the Fed and Other Central Banks

[Toro]

... Central banks have been built on financial crises, with each major tremor expanding their role. And today's economic convulsions foreshadow more changes to come at the Fed.

If it wasn't for crises, central banks might not exist. In Britain, after years of civil war and the ouster of King James by William III in 1688, the country's public finances were in tatters, with tax collection falling short of what the government needed to pay its bills and lenders unsure about the stability of the government. The Bank of England, one of the first central banks and for centuries the most important one, was founded in 1694 to purchase government debt and curtail the funding crisis.

The establishment of the Bank of England came at the beginning of a great societal shift, when new ideas were challenging old doctrines, and rising world trade was giving new power to merchant classes. But the expansion in commerce and banking also made financial crises more prevalent. Speculative bubbles led to spectacular market crashes.

"The Bank of England received heavy criticism in many of the crises of the 19th century when it didn't act fast enough," says Rutgers University economic historian Michael Bordo. "It learned to be lender of last resort." ...

But for much of the 19th century and into the 20th, the U.S. had no central bank. Many Americans feared that nothing good could come from one bank wielding so much power. In 1816, a central bank to help fund government finances that had been badly depleted by the War of 1812 was established. In his 1832 veto of the extension of the bank's charter, President Andrew Jackson wrote that "Great evils...flow from such a concentration of power in the hands of a few men irresponsible to the people."

While financial crises in England diminished through the 19th century, they were a regular feature of American life.

"Crises are much more frequent when we don't have a central bank," says New York University Stern School economic historian Richard Sylla. With nobody willing to step into the fray when borrowers ran into trouble, small credit-market problems could easily spin into major ones.

The turning point came in 1907. The availability of credit was tight throughout the world that year, and that October, a speculative attempt to corner the stock of United Copper Co. failed. That sparked a run on the deposits of Knickerbocker Trust Co., which had helped fund the scheme, eventually leading to the firm's collapse. John Pierpont Morgan, the giant of American finance, took on the role of lender of last resort.

Struggling with a bad cold, sleep-deprived and sustaining himself with little more than cigars, Morgan put up millions of his firm's money to avert the crisis and cajoled other bankers into doing the same. In a famous incident, Morgan gathered a throng of bankers and trust executives in his library on the evening of Nov. 3, locking the doors and not opening them until 4:45 the next morning, after the men had agreed to take part in a $25 million loan.

The Panic of 1907 helped push aside longstanding worries over the economic power concentrated in an American central bank, and in 1913 the Federal Reserve Act was passed....

Central Banks Are Creatures of Financial Crises - WSJ.com

 

[Zoomie1980]

... Central banks have been built on financial crises, with each major tremor expanding their role. And today's economic convulsions foreshadow more changes to come at the Fed.

If it wasn't for crises, central banks might not exist. In Britain, after years of civil war and the ouster of King James by William III in 1688, the country's public finances were in tatters, with tax collection falling short of what the government needed to pay its bills and lenders unsure about the stability of the government. The Bank of England, one of the first central banks and for centuries the most important one, was founded in 1694 to purchase government debt and curtail the funding crisis.

The establishment of the Bank of England came at the beginning of a great societal shift, when new ideas were challenging old doctrines, and rising world trade was giving new power to merchant classes. But the expansion in commerce and banking also made financial crises more prevalent. Speculative bubbles led to spectacular market crashes.

"The Bank of England received heavy criticism in many of the crises of the 19th century when it didn't act fast enough," says Rutgers University economic historian Michael Bordo. "It learned to be lender of last resort." ...

But for much of the 19th century and into the 20th, the U.S. had no central bank. Many Americans feared that nothing good could come from one bank wielding so much power. In 1816, a central bank to help fund government finances that had been badly depleted by the War of 1812 was established. In his 1832 veto of the extension of the bank's charter, President Andrew Jackson wrote that "Great evils...flow from such a concentration of power in the hands of a few men irresponsible to the people."

While financial crises in England diminished through the 19th century, they were a regular feature of American life.

"Crises are much more frequent when we don't have a central bank," says New York University Stern School economic historian Richard Sylla. With nobody willing to step into the fray when borrowers ran into trouble, small credit-market problems could easily spin into major ones.

The turning point came in 1907. The availability of credit was tight throughout the world that year, and that October, a speculative attempt to corner the stock of United Copper Co. failed. That sparked a run on the deposits of Knickerbocker Trust Co., which had helped fund the scheme, eventually leading to the firm's collapse. John Pierpont Morgan, the giant of American finance, took on the role of lender of last resort.

Struggling with a bad cold, sleep-deprived and sustaining himself with little more than cigars, Morgan put up millions of his firm's money to avert the crisis and cajoled other bankers into doing the same. In a famous incident, Morgan gathered a throng of bankers and trust executives in his library on the evening of Nov. 3, locking the doors and not opening them until 4:45 the next morning, after the men had agreed to take part in a $25 million loan.

The Panic of 1907 helped push aside longstanding worries over the economic power concentrated in an American central bank, and in 1913 the Federal Reserve Act was passed....

Central Banks Are Creatures of Financial Crises - WSJ.com

Like the Fed or hate the Fed, it is a very small rudder on a very large boat. All the machinations of the Fed in the past 18 months have virtually NO effect in stemming the crisis. In fact, overall fiscal policy, from the Fed to Congressional spending has had almost NO impact. The lesson is that US governmental fiscal policy, in general, has less and less impact on economic reality in this age of globalism. The rise of China, India, S. Korea, eastern Europe, and even post communist Russia along with the continued impact of Japan and the EU, simply means we just aren't big enough anymore to have the impact we used to. And within most of those economies the size of government as a percentage of their overall economy continues to shrink, dramatically in many cases. With every passing decade government as an economic player becomes less and less relevant.

 

[Killuminati]

[

Like the Fed or hate the Fed, it is a very small rudder on a very large boat. All the machinations of the Fed in the past 18 months have virtually NO effect in stemming the crisis. In fact, overall fiscal policy, from the Fed to Congressional spending has had almost NO impact. The lesson is that US governmental fiscal policy, in general, has less and less impact on economic reality in this age of globalism. The rise of China, India, S. Korea, eastern Europe, and even post communist Russia along with the continued impact of Japan and the EU, simply means we just aren't big enough anymore to have the impact we used to. And within most of those economies the size of government as a percentage of their overall economy continues to shrink, dramatically in many cases. With every passing decade government as an economic player becomes less and less relevant.[/QUOTE]

You have no idea what you're talking about, the fed has every thing to do with this
crisis. The fed controls inflation, and inflation is the main reason for this mess we are in now. Inflation devalues our money, and rises prices of services and goods. With less spending power behind the dollar, and service and good prices rising we have a big problem. Nothing like the great depression. In the depression there was a shortage on money, this go round there is to much money in circulation.

 

[AVG-JOE]

... Central banks have been built on financial crises, with each major tremor expanding their role. And today's economic convulsions foreshadow more changes to come at the Fed.

If it wasn't for crises, central banks might not exist. In Britain, after years of civil war and the ouster of King James by William III in 1688, the country's public finances were in tatters, with tax collection falling short of what the government needed to pay its bills and lenders unsure about the stability of the government. The Bank of England, one of the first central banks and for centuries the most important one, was founded in 1694 to purchase government debt and curtail the funding crisis.

The establishment of the Bank of England came at the beginning of a great societal shift, when new ideas were challenging old doctrines, and rising world trade was giving new power to merchant classes. But the expansion in commerce and banking also made financial crises more prevalent. Speculative bubbles led to spectacular market crashes.

"The Bank of England received heavy criticism in many of the crises of the 19th century when it didn't act fast enough," says Rutgers University economic historian Michael Bordo. "It learned to be lender of last resort." ...

But for much of the 19th century and into the 20th, the U.S. had no central bank. Many Americans feared that nothing good could come from one bank wielding so much power. In 1816, a central bank to help fund government finances that had been badly depleted by the War of 1812 was established. In his 1832 veto of the extension of the bank's charter, President Andrew Jackson wrote that "Great evils...flow from such a concentration of power in the hands of a few men irresponsible to the people."

While financial crises in England diminished through the 19th century, they were a regular feature of American life.

"Crises are much more frequent when we don't have a central bank," says New York University Stern School economic historian Richard Sylla. With nobody willing to step into the fray when borrowers ran into trouble, small credit-market problems could easily spin into major ones.

The turning point came in 1907. The availability of credit was tight throughout the world that year, and that October, a speculative attempt to corner the stock of United Copper Co. failed. That sparked a run on the deposits of Knickerbocker Trust Co., which had helped fund the scheme, eventually leading to the firm's collapse. John Pierpont Morgan, the giant of American finance, took on the role of lender of last resort.

Struggling with a bad cold, sleep-deprived and sustaining himself with little more than cigars, Morgan put up millions of his firm's money to avert the crisis and cajoled other bankers into doing the same. In a famous incident, Morgan gathered a throng of bankers and trust executives in his library on the evening of Nov. 3, locking the doors and not opening them until 4:45 the next morning, after the men had agreed to take part in a $25 million loan.

The Panic of 1907 helped push aside longstanding worries over the economic power concentrated in an American central bank, and in 1913 the Federal Reserve Act was passed....

Central Banks Are Creatures of Financial Crises - WSJ.com

Like the Fed or hate the Fed, it is a very small rudder on a very large boat. All the machinations of the Fed in the past 18 months have virtually NO effect in stemming the crisis. In fact, overall fiscal policy, from the Fed to Congressional spending has had almost NO impact. The lesson is that US governmental fiscal policy, in general, has less and less impact on economic reality in this age of globalism. The rise of China, India, S. Korea, eastern Europe, and even post communist Russia along with the continued impact of Japan and the EU, simply means we just aren't big enough anymore to have the impact we used to. And within most of those economies the size of government as a percentage of their overall economy continues to shrink, dramatically in many cases. With every passing decade government as an economic player becomes less and less relevant.

Do you think that China will be better at building an economy where central direction learns the value of free enterprise than the USA will build as our free enterprise learns the value of central direction?

I would like to see banking and insurance nationalized - but that's it - only banking and insurance. Like a national credit union... It is not like either of those "industries" actually makes anything.

-Joe

 

[Toro]

[
You have no idea what you're talking about, the fed has every thing to do with this
crisis. The fed controls inflation, and inflation is the main reason for this mess we are in now. Inflation devalues our money, and rises prices of services and goods. With less spending power behind the dollar, and service and good prices rising we have a big problem. Nothing like the great depression. In the depression there was a shortage on money, this go round there is to much money in circulation.

The Fed does not control inflation. It effects inflation but it does not control it.

 

[editec]

The FED as currently designed puts enormous power into the hands of the banking establishment.

Let's remember that the FED is owned by those private banks, shall we?

So naturally the FED dances to the tune that them what brought it to the dance (in 1913)

The FED thinks nothing of ratcheting up the interest rates to surpress inflation, and they do so knowing full well that thier actions cause millions of Americans to lose their jobs.

But the FED doesn't even recognize the pernicious effects of inflation in the stock market, and certainly doesn't do anything to curtail that when it sees it happening.

That is partially how we got into this mess, folks.

Bubbles in the investments markets, bubbles that the FED not only allowed, but encouraged popped and now our economy is in a shambles.

Note how even after the BANKS were given a half trillion dollars, these private banks are not lending to get the economy going, and there isn't JACKSHIT that the FED can do about it?

This leads me to believe that the FED (as currently designed) and our Congress (as currently manned) is not really so interested in the wellbeing of the AMERICAN PEOPLE, but that they are both merely tools of the monied classes which dominate our government, our economy, and our way of life.

 

[sealybobo]

Yes, crisis' they cause. It's called disaster capitalism. Create a crisis and people always turn the the government to help. And in this case, the government is the enemy.

It still made no sense turning over our gold to the rich bankers and in turn they would keep the gold for themselves and now our money isn't worth the paper it is printed on. It is only worth what you think it is worth.

And now the debt grows and grows and grows. But if we managed our own $ then we wouldn't charge ourselves interest. But the Bankers that own the federal reserve do.

Here's the thing. Our founding fathers warned us not to let this happen. But all it took was for them to bribe a few Senators in 1913 and they passed the Federal Reserve Act.

Why didn't those politicians heed this warning?

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

– Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)


And why doesn't this quote from Woodrow Wilson alarm you?

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." -Woodrow Wilson, after signing the Federal Reserve into existence


It absolutely baffles me that the American public is so stupid, lazy and sheepish to allow this to continue. Yet we do. Republican voters vote for men who serve these bankers and Democrats think their party doesn't serve these bankers, and they do.

Watch Freedom to Fascism by Aaron Russo. It explains everything.

 

[Hum Dinger]

Watch Freedom to Fascism by Aaron Russo. It explains everything.

What a bunch of bunk. No law requiring taxation - another BIG LIE!

Try this:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

 

[Toro]

Watch Freedom to Fascism by Aaron Russo. It explains everything.

What a bunch of bunk. No law requiring taxation - another BIG LIE!

Try this:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Just ask Wesley Snipes.

 

[indago]

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