Why do we need to abolish the Fed? What's the alternative?

[enjerth]

Quick synopsis:

The Fed creates a business cycle (boom/bust cycle) by setting interest rates at artificial levels. They create money from nothing, loaning it out at interest, accumulating money while providing no value to anyone (in fact, creating a whole class of economic parasites-bankers and pencil pushers).

The alternatives:

Fiat currency controlled by the government, which is bad in that hyperinflation and mismanagement can still occur, but it's better to at least have some openness.

Gold standard controlled by the government, which is good because it forces the government to be fiscally responsible, but it is bad in that there is less flexibility in the system, which can impede growth.

Non-standardized currency which is unregulated by the government, which is good because it provides maximum choice. The only downside to this is that with many currencies comes confusion, which MIGHT make trade difficult and lead to higher rates of crime--not particularly likely, but it is an unknown.

On the gold standard and growth, what gold prevents is UNCHECKED growth. Unchecked growth is bad and it's the primary reason for our current financial crisis. People talk about the growth of our economy as though it were something great, but it is an obamination (sorry, couldn't help myself).

The faster we grow the more resources we consume and the more unstable society becomes. Fractional-reserve banking makes easy credit, and fiat currency makes endless credit, leading to ever-growing consumption of resources. There is always a limit to growth, when we run out of resources. If our easy money supply allows us to run headlong into that barrier, society will literally self-destruct.

This growth will be our doom as we face the end of resources.

Using a scarce resource (resources are not endless, as fiat money is) as currency is a natural barrier to wild and unsustainable growth.

 

[Zippyjuan]

It would seem that some believe that things were better under the left side of the inflation graph than the right side. A combination of deflation and high inflation vs. persistant but lower inflation. Deflation is not a good thing since it tends to occur during economic downturns. You do not find it in periods of prosperity. High inflation is also not good. Ideal would of course be zero inlfation but that is very difficult if not impossible to achieve without price controls. The chart was posted to show how bad things have been since we got the Fed but it seems to show the opposite. I invite anybody to find deflation during economic growth periods.

The wild oscilations in prices have become much more stablized over time since the Fed was founded- allowing both individuals and businesses to better estimate their future costs of things which makes it easier for consumers to decide how much to save for the future (many seem to have decided to save nothing for the future) and businesses to be able to decide how much they can afford to expand their operations.

Is this due to what the Fed does? Certainly not completely. There are many factors at work including our changing from making our own goods to getting somebody else to do it for cheaper. This has helped keep down our inflation for now. But we are running out of places with ever lower labor costs so this will be coming to an end (if it has not already).

Boom and busts happened very often before the Fed. And they will continue to happen. That inflation chart clearly shows the economy lurching from boom to bust in just a few years- back and forth. They occur with and without a Fed and with and without a gold standard. And if you look at the notes below the graph, inflation and deflation were very common under the gold standard as well. Here- let me re-post the chart so you don't have to flip back a couple of pages to see it:

 

[enjerth]

It would seem that some believe that things were better under the left side of the inflation graph than the right side. A combination of deflation and high inflation vs. persistant but lower inflation. Deflation is not a good thing since it tends to occur during economic downturns. You do not find it in periods of prosperity. High inflation is also not good. Ideal would of course be zero inlfation but that is very difficult if not impossible to achieve without price controls. The chart was posted to show how bad things have been since we got the Fed but it seems to show the opposite. I invite anybody to find deflation during economic growth periods.

The wild oscilations in prices have become much more stablized over time since the Fed was founded- allowing both individuals and businesses to better estimate their future costs of things which makes it easier for consumers to decide how much to save for the future (many seem to have decided to save nothing for the future) and businesses to be able to decide how much they can afford to expand their operations.

Is this due to what the Fed does? Certainly not completely. There are many factors at work including our changing from making our own goods to getting somebody else to do it for cheaper. This has helped keep down our inflation for now. But we are running out of places with ever lower labor costs so this will be coming to an end (if it has not already).

Boom and busts happened very often before the Fed. And they will continue to happen. That inflation chart clearly shows the economy lurching from boom to bust in just a few years- back and forth. They occur with and without a Fed and with and without a gold standard. And if you look at the notes below the graph, inflation and deflation were very common under the gold standard as well. Here- let me re-post the chart so you don't have to flip back a couple of pages to see it:

Stop for a moment and consider that every deflationary period was the result of natural law. Inflation and deflation must always find balance. Now, look forward on that graph and try to imagine the balance.

The left side appears to be quite unstable. But really, it's pretty well balanced. The right side is terribly out of balance.

As it is, it looks good right now, to one who does not recognize that natural forces work towards bringing a balance. But balance will come, and it will be devastating.