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FED policies are supposed to encourage or curtail financial risk-taking, depending on whether the economy is moribund or overheated, respectively.
If I can earn a higher rate of return on FDIC cash in the bank, than in the stock market, why should I invest in the stock market? If I can earn a higher rate of return in the bank than in municipal bonds, why should I invest in my municipality? For this reason, interest rates need to be low.
But if interest rates are too low for too long, then it becomes too cheap to borrow. There will be excessive investment in ultimately questionable things, mania and blatant disregard for risk. That's when interest rates need to rise.
The great surprise over the past 7 years is the low level of inflation. In my view, raising interest rates would be counterproductive, until there's at least a smattering of evidence that inflation is rising. Presumably the FED is thinking about this with far more sophistication than I could, or anyone else on a public discussion board could. I'm not saying that the FED is infallible, but I most definitely do think that they're more astute than nearly all laymen.
But I thought you wrote that we should not reward no-risk. That is what I got from the first part of your post I quoted. I guess the housing bust is this excessive investment in questionable thing mania. And if cost of living is rising than how has inflation not rose too?
The problem I have with this type thread is not knowing who knows what they are talking about and who is just talking through their hat. I wish I knew the qualifications of those who are discussing it.
The size and scope of the Federal government greatly increased after the Civil War. That makes an income tax necessary, as it's a relatively easy way to generate revenue. Every modern economy is governed by a central authority with the power to tax income.
The Federal Reserve controls the money supply. The US Mint, a sub-agency of the Treasury, is responsible for creating physical currency.
I don't see any actual argument against the Federal Reserve. You're presenting a "spooky" origin story rather than arguing on the merits.
Glass-Steagall did nothing of the sort. It made it illegal to combine an investment bank and a commercial bank under the same bank holding company and regulated the securities activities that investment banks and commercial banks could engage in.
I don't think you quite understand how the Federal Reserve conducts monetary policy. The disproportionate gains in wealth by the richest Americans within the past few years have occurred because they are disproportionately invested in stock and bond securities.
While it's undeniable that the Fed's ZIRP has goosed the nominal valuations of the equity and bond markets, there's nothing preventing the average American from owning stocks and bonds.
I think you have a very poor understanding of what the Federal Reserve does and an even poorer understanding of what could feasibly take its place.
I'm a libertarian and I support the Federal Reserve. The biggest problems in our economy have nothing to do with monetary policy. Our two biggest problems are a. the appalling lack of financial literacy and b. a tax and regulatory structure that is too burdensome to the private sector.
Doesnt the Mint only print at the behest of the FED? I am no expert, forgive me for my ignorance. That is what I remember hearing.
The richest Muricans my be disproportionately invested in stocks and bonds, but they have to have the money in the first place to be that disproportionately invested. So it remains to be revealed how they got the money in the first place.
Conspiracy theorists: The fed isn't some magical organization made to strictly help the rich. Their purpose is to keep inflation in check (we NEED SOME inflation, deflation is toxic for the economy because it destroys new capital spending and hurts standard of living) and protect the US economy from economic downturns. So remember: it's not some hair-brained conspiracy to make the rich richer, that's just a side effect of big business.
Libertarians: Capitalism is not perfect on its own. Business is like a mischievous child, if not supervised it can get into a lot of trouble (and Uncle Sam is like a caring uncle who baby sits his nephew and punishes him if he misbehaves). If it were not for the Federal Reserve the 1929 stock market crash and 2008 crash would have been much worse. There is no way Wall Street would have stopped panic selling and we would have been much deeper in the pile. We needed a strong government agency to defend us and help make it easier to borrow to stimulate out economy. The damage was great so it took until now to truly see results.
The Federal Reserve is the epitome of the old "letting Dracula guard the blood bank" cliche. After years of quiet maneuvering, luring everyone into debt and inflating/collapsing market bubbles they have created an environment where all they would need to do to totally crash the global economy and destroy the country itself is to say: "Interest rates are now 8%" next month. Nobody could stop them or tell them differently, no vote would be cast, no justification given and nobody could do anything about it.
Now say they used that considerable leverage... told congress: "give me____________ now or the interest rates will be 8% next month." See the problem?
The Federal Reserve is a private entity that answers to no one, has it's own agenda and has WAY too much power. All we have to protect ourselves from them is the hope they'll be gentle as they have their way with us...
Business is like a mischievous child, if not supervised it can get into a lot of trouble (and Uncle Sam is like a caring uncle who baby sits his nephew and punishes him if he misbehaves).
What kind of uncle takes money from his nephews?
The wolf is guarding the hen house. Unlike Uncle Sam, most businesses are operating in the black.
Moderator cut: .What do you mean by calling someone a conspiracy theorist? Conspiracies are everywhere. Politics is conspiracy. The idea that are no conspiracy is ludicrous and crazy. Conspiracies run the world. Where two people share and support idea, that is a conspiracy.
Last edited by yellowbelle; 09-19-2015 at 12:04 PM..
Reason: Personal attack removed
What do you mean by calling someone a conspiracy theorist? Conspiracies are everywhere. Politics is conspiracy. The idea that are no conspiracy is ludicrous and crazy. Conspiracies run the world. Where two people share and support idea, that is a conspiracy.
Do you believe Elvis, JFK, Tupac, and Jimmy Hoffa are still alive at NORAD?
Do you believe in reptilians as our true leaders?
Do you believe the Federal Reserve is part of some secret conspiracy?
Do you believe jet fuel can't melt steel beams?
Do you believe in the Illuminati?
Do you feel a tin foil hat protects you from government mind-reading tech?
Do you believe Roswell really WAS aliens?
Do you believe that Fidel Castro was the man on the grassy knoll?
Do you believe that we have time travel technology and are hiding it from the masses?
If you believe any of these things I have a bridge to sell you!
Last edited by yellowbelle; 09-19-2015 at 12:04 PM..
Reason: orphaned quoted text has been removed
The wolf is guarding the hen house. Unlike Uncle Sam, most businesses are operating in the black.
A nephew who will buy heroin if the uncle doesn't supervise him (the money has to be used for good causes sometimes instead of solely for the profit of the business).
The Federal Reserve created the Great Depression when it jacked up the margin call rate. People were forced to sell the stocks they had been able to buy via very generous margins.
Bernanke later apologized for this fact.
Read "The Creature from Jekyll Island". I think its only ~$70 at Amazon.
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