I can't be TOO HARD on the Fed.

[Mongoose470]

The Fed isn't the basis of our monetary system, the currency is. The Fed cannot change that. They really do have some brilliant men working there, far more brilliant than you or I. I suspect they are perfectly aware of the consequences of their rate cuts.

The Fed has the daunting task of balancing our economy between the two unavoidable consequences of an uncompetitive, hyper-regulated market and an unsound currency: Inflation or Unemployment. Add in supply and demand issues in energy, a war and that teeter totter is now balanced on the edge of a straight razor. Pick your poison folks because unless we see a return to sound currency and free market principles, the Fed has to pick between those two.

So why are they choosing inflation?

There are two reasons:

Inflation is a relatively slow death that spreads misery relatively equally among the masses compared to unemployment. Unemployment is the chopping block that cuts off the arms off 10-20% of the workforce, usually the poor and middle class. It's quick with unbelievable misery on quite a large sect of the population.

Psychology: People are highly influenced by the nominal value of their money: The number. They will notice the devaluing of the currency at the supermarket but are always comforted by what appears to be a decent number on their paycheck. They won't take to bread riots, at least for a while. Unemployment? 20% of the population won't get a red cent. Immediate crisis. They will take to the street, they will riot for bread and quickly. Why did FDR impliment The New Deal and focus so heavily on reducing unemployment? Because he feared a communist revolution, right here at home. He feared political instability. With jobs and a paycheck, people feel like they still have SOME control over their lives. Those without jobs do not and are volatile.

Note though that both those poisons have the same endgame. There are only so many bubbles we can create before the air pump runs out. The endgame is the destruction of our currency. In inflation currency becomes valueless. In unemployment it has no meaning. A great example of inflationary endgame is the Weimar Republic. The unemployment endgame is The Great Depression. One creeped up on you like a snake, the other like a thief in the night.

Inflation is a slow death so the air tank might not be empty...yet: Capitulation on the installment plan. Watch for a coming commodity bubble and the bill.

I don't envy the Fed, or us. Somebody ease my concerns because I doubt we'll ever return to sound money and free market principles until after endgame...

if our country doesn't plunge into revolution.

 

[Bradley in DC]

The Fed is just the enabler. The big spending Congressmen producing deficits is the problem.

 

[DriftWood]

You are right, unemployment can easily be solved. All you have to do is make industry work as unproductively as possible. Why not make the tractor illegal, that way more people will be employed as farmers. Or why not make it illegal for anyone to do any work at all without having another person who watches and takes notes. Two people to do the work of one. Or why not have the govt make work programs for people, have them dig holes and fill them with dirt again (they do this in India.. digging ditches to nowhere). Unemployment solved.

People and govt should stop worrying about unemployment and scrap their unemployment targets. The whole progress of mankind has come thru the strive to make things more efficiently and thereby increasing unemployment in the short term. The only target should the inflation target.

Unemployment will solve itself if govt stop to try and solve it. Inflation is the real enemy, it lowers efficiency by making markets and contract between people less predictable. Everyone has to adapt to the new currency value by revaluing their prices and commitments. It like a group of people having to run from A to B while holding hands trying to maintain their relationships.

Cheers

 

[Allen72289]

The fed is unnecessary.

All we need from the government is protection of our rights.


No economy handling.

I suppose if we had true free market economics and no fiat currency we would eventually learn from our mistakes and there would be no booms or busts, just a steady economic growth.

The economy needs to collapse, it's an economy built upon consuming. That sort of thing can't go on forever. Eventually China will realize they're recycling their wealth.

 

[Ozwest]

The Fed is just the enabler. The big spending Congressmen producing deficits is the problem.

A thread defending the FED, and you have not thrashed the poster...

C'mon Bradley.

Should have known a man from D.C. would give in to pragmatism.

Surprise. Surprise.

Not.

 

[Chester Copperpot]

A thread defending the FED, and you have not thrashed the poster...

C'mon Bradley.

Should have known a man from D.C. would give in to pragmatism.

Surprise. Surprise.

Not.

Technically, Bradley is right.. However, thousands of years of human history have shown that man cannot control himself when it comes to choosing between fiscal responsibility AND votes.. he always goes for the votes at the expense of fiscal responsibility.. Thats why the Constitution puts in no paper money and ONLY gold and silver shall be money.

Hell, one could even argue the Fed IS constitutional, but it defintiely goes against the intent of the constitution no doubt.

 

[Ozwest]

Technically, Bradley is right.. However, thousands of years of human history have shown that man cannot control himself when it comes to choosing between fiscal responsibility AND votes.. he always goes for the votes at the expense of fiscal responsibility.. Thats why the Constitution puts in no paper money and ONLY gold and silver shall be money.

Hell, one could even argue the Fed IS constitutional, but it defintiely goes against the intent of the constitution no doubt.

My...

How we have digressed.

 

[Chester Copperpot]

My...

How we have digressed.

why do you say that? I still loathe the fed.. Im just being devil's advocate here.

 

[Ozwest]

why do you say that? I still loathe the fed.. Im just being devil's advocate here.

I know.

But...

I'm detecting apathy.

 

[Ozwest]

Compromise...

Arghhh

 

[Chester Copperpot]

I know.

But...

I'm detecting apathy.

nope, not from me.. I still carry around my US notes and silver certificates to educate people.... best way to explain the fed in 30 seconds and people get it.

 

[Ozwest]

Might as well make some money during the meantime.

Can only lead a horse to water...

 

[bander87]

Don't be too sure.

The Challenger Space Shuttle blew up because a committee KNEW the o-rings wouldn't hold up yet went on with the mission anyways.

 

[Ozwest]

I thought I might be obtuse/abstract.

Please explain bander87.

 

[Brent H]

John Maynard Keynes writes about the ragaves of inflation:

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

 

[forsmant]

The Fed isn't the basis of our monetary system, the currency is. The Fed cannot change that. They really do have some brilliant men working there, far more brilliant than you or I. I suspect they are perfectly aware of the consequences of their rate cuts.

The Fed has the daunting task of balancing our economy between the two unavoidable consequences of an uncompetitive, hyper-regulated market and an unsound currency: Inflation or Unemployment. Add in supply and demand issues in energy, a war and that teeter totter is now balanced on the edge of a straight razor. Pick your poison folks because unless we see a return to sound currency and free market principles, the Fed has to pick between those two.

So why are they choosing inflation?

There are two reasons:

Inflation is a relatively slow death that spreads misery relatively equally among the masses compared to unemployment. Unemployment is the chopping block that cuts off the arms off 10-20% of the workforce, usually the poor and middle class. It's quick with unbelievable misery on quite a large sect of the population.

Psychology: People are highly influenced by the nominal value of their money: The number. They will notice the devaluing of the currency at the supermarket but are always comforted by what appears to be a decent number on their paycheck. They won't take to bread riots, at least for a while. Unemployment? 20% of the population won't get a red cent. Immediate crisis. They will take to the street, they will riot for bread and quickly. Why did FDR impliment The New Deal and focus so heavily on reducing unemployment? Because he feared a communist revolution, right here at home. He feared political instability. With jobs and a paycheck, people feel like they still have SOME control over their lives. Those without jobs do not and are volatile.

Note though that both those poisons have the same endgame. There are only so many bubbles we can create before the air pump runs out. The endgame is the destruction of our currency. In inflation currency becomes valueless. In unemployment it has no meaning. A great example of inflationary endgame is the Weimar Republic. The unemployment endgame is The Great Depression. One creeped up on you like a snake, the other like a thief in the night.

Inflation is a slow death so the air tank might not be empty...yet: Capitulation on the installment plan. Watch for a coming commodity bubble and the bill.

I don't envy the Fed, or us. Somebody ease my concerns because I doubt we'll ever return to sound money and free market principles until after endgame...

if our country doesn't plunge into revolution.

I don't know where you get any of this information from. The federal reserve united the banks into one super banking system that allows the country to create inflation together. That limits the checks and balances of competing banks of the Old West. The currency was sound until the banks debased the crap out of it.

The depression was caused by inflation. Check out the book "America's Great Depression" by Murray Rothbard. The total money supply increased from $45 billion in 1921 to $73 billion in 1929. That is nearly a doubling of the supply of money in eight years.

Herbert Hoover implemented the New Deal even though it was not called that. Hoover was our first interventionist president and laid the groundwork for his interventions throughout the 1920's as secretary of commerce and then president. Hoover was an avid supporter of public works programs to fight unemployment during depressions and felt the government did not provide enough public works during the 1920-21 depression. Hoover laid the groundwork and Roosevelt continued to exacerbate the problem.

The currency actually gained purchasing power during the Great Depression. The currency had a lot of meaning to the unemployed. They wouldn't have been as many unemployed had the government allowed the country to liquidate the bad debt and people allowed wage rates to fall.

This is where the federal reserve and the government has brought us. They deserve the blame just as much as those of us who allowed this to happen.

 

[Mongoose470]

First of all I did not indicate what caused the Great Depression.

Seond of all the Fed is only necessary in the monster we created! Dissolve the Fed but not the currency and our welfare state and you will see another depression.

I also pointed out that we went to the welfare state to control economic volatility and prevent socialist revolutions. READ and KNOW YOUR ENEMY!

I don't believe there's some devious conspiracy in the Fed. They have two poisons to choose from. They are picking inflation. I pointed out that the endgame of unemployment is just as bad if not worse. The market IN ITS CURRENT STATE won't self repair. WE DON'T HAVE A MARKET THAT IS DISCIPLINED VIA NATURAL MARKET FORCES! Get that idea out of your head!

Dissolving the Fed and only the Fed will accomplish nothing and just make things worse. We need to dissolve the entire WELFARE STATE including the Fed our FIAT currency.

You better learn about monetary economics. The CURRENCY IS THE BASIS OF IT!

I did not defend the Fed. I am only stating they are doing ther best with a welfare state that is DESTINED for two ultimate ends: Unemployment or inflation.

Explaining the great depression is simple if you understand the Keynesian model. I am a positive Keynesian, meaning I beleive his model predicts responses of our macroeconomy. It is accruate because we DO NOT HAVE A FREE MARKET! Prices have been and always will be sticky downward in a HYPER REGULATED MARKET. When there is a demand shock, like there was in 1929, a FREE MARKET would allow prices to drop. Prices would drop and all things being equal, there would be no unemployment. But we had and still have non competitive forces in our market. Government, unions, monopolies, oligopolies, on and on ad infinitum. The Keynesian model simply recognized that. In our regulated welfare state, a demand shock doesn't cause prices to go down, IT CREATES UNEMPLOYMENT!! In 1929 we had relatively high interest rates and high taxes and tariffs. That always brings about Depression in the Keynesian model.

Now to normative economics. Keynes argued that given the real conditions influencing our market, the government was wrong in doing nothing, it had to lower interest rates and lower taxes and tariffs to stimulate demand. He was right BUT ONLY WITHIN THE FRAMEWORK OF THE WELFARE STATE! Like Ron Paul always says: All we ever argue is >>>how to manage the welfare state.<<< I think we should argue whether we still need the welfare state. I'm on the side of throwing the welfare state in its entirety to the scrap heap, return us to the gold standard, deregulate the economy, stop sponsoring monopolies (INCLUDING unions,) cut social programs designed to redistribute income, etc.

 

[Brent H]

10 Planks of Communism

4th Plank: "Centralization of credit in the hands of the State, by means of a national bank with state capital and an exclusive monopoly."

 

[Brent H]

“The One World government leaders and their ever close bankers have now acquired full control of the money and credit machinery of the U.S. via the creation of the privately owned Federal Reserve bank.”

Curtis Dall – (FDR’s son in-law -
From his book; FDR: My Exploited Father In-Law

 

[Brent H]

"We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had not subject to the bright lights of publicity during those years. But, the work is now much more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries."

- David Rockefeller, founder of the Trilateral Commission, in an address to a meeting of The Trilateral Commission, in June, 1991.