End the FED?

[Aman A.K.A. Ahamburger]

This is an ongoing debate around here. A perfect topic for a new thread, with a good article that brings up some interesting points.

End The Fed? And Replace It With…
wallstreetpit.com/67951-end-the-fed-and-replace-it-with

Of course, one could argue that the country could return to the pre-Fed-era banking chaos of the late-19th century, but that’s the monetary equivalent of advocating the use of horses as a solution to the traffic problems created by cars.

So, how about some solutions. There are lots of tear it down ideas. Lets here some solutions to monetary policy, and what could be done to ensure things like counterfeiting remain at a acceptable levels.

[vl]

The Federal Reserve Banking System was a false alternative from Day One. Our problem is- that we will accept credibility from old money but not examine the recommendation for schemes and scams. Most Eastern American banks were destroyed in the 1905-1915 era, having lent out European older monies to Loan Sharks without viable assets as security. New American entrepreneur money lost its girth because the ventures it invested in were beholden to those same banks but couldn't get cash for daily operations. When "The Fed" was proposed, the obvious question was- so if you and I don't have the currency... who does? The answer was the same as it was historically when Rothschild had screwed the English-- invested in the fall because it was an intentionally controlled outcome.
CASH is currency and needs to be tied specifically to an undeniable Index-- the WORK unit. When the population works, it has cash flow. Cash needs never to sit out an economy or it becomes worthless and the hoarder becomes-- broke. Whether a dollar or a bottle cap, the form is not significant, the way it is used-- certainly is. If we tie the value of the currency unit to an hour of validly performed labor-- we get cash that is reconciled in a society.
This, is completely within reach and cuts "The Fed" completely out of the picture. Backing currency with compromise inhibitors like-- fixed rate fixed term fixed amortization credit, controls inflation vs. appreciation. Likely, the home you buy will depreciate until it either-- is updated because it is in an amenity-rich environment or assimilated into a redevelopment based on the needs of the society. Banking became an industry out of greed, it actually has no value to any of us and is isn't a platform for wealth-building. Eliminate all the shell-game scams that comprise banks and you get cash flowing through communities instead of giant funds that hedge us out of existence.
Your short answer is-- the Fed, choose the WORK UNIT as a new Index and rebuild the basis for cash flowing throughout the nation on labor not political flavor.

[verrip1]

Sounds like a somewhat idiotic proposal on the surface, but as you think about it more, it's actually a grossly idiotic proposal.

Comrade V_L, all you really need to do is to flush it out more (down?). Maybe you could write it up into a Manifesto.

[vl]

Comrade? Is that what you GOP New World Order morons call each other? I prefer-- American. You can distinguish me by my lack of uniformity in favor of FREEDOM and preference for democracy over dictatorial dick-head-man-ship authority.

[verrip1]

Da, comrade. You give us the freedom of the lumpen proletariat who need tending by the likes of ..... you!

[Aman A.K.A. Ahamburger]

V_L I agree that greed is the problem. I just got to reading this thread, and I was actullat talking about greed in other, so we are on the same page there. However..

CASH is currency and needs to be tied specifically to an undeniable Index-- the WORK unit. When the population works, it has cash flow. Cash needs never to sit out an economy or it becomes worthless and the hoarder becomes-- broke. Whether a dollar or a bottle cap, the form is not significant, the way it is used-- certainly is. If we tie the value of the currency unit to an hour of validly performed labor-- we get cash that is reconciled in a society.

That is exactly what we have now.. You go out you get paid to work. Some people do get govt checks, true. However, people that have a decent life also work. You have actually proven that a note from the FED works just fine as a form of currency because of the bold part that I did in your quote above.

It's seems to me that the FED= greed. That is insane to me.

How does a currency work in your system V_L. How is it created, and by who? Who distributes the currency. Is there a central government that set the amount you are paid? Who selects your job? What is the incentive to work in jobs like sanitation and extermination?

[Driftr]

I don't support an end to the Fed. I do support a full audit of it and forcing them to be accountable to both parts of their mandate. When did stable prices become 1-2% inflation? How about if we have 2% inflation one year we shoot for 2% deflation the next. You know, over time keep prices STABLE?

[maui1]

i am ok with the end of the fed. they don't manage counterfeiting or anything that is all ready law anyway.

let the free choice market manage monetary values on it's own.

while you are at it......get rid of most fed depts as all they do is give the american public a false sense of security, thinking that the gov't is prepared to do something that can't do very well, if at all.

[Aman A.K.A. Ahamburger]

Interesting concept Drifter. How would you accomplish that balance? What we know is that deflation is a hard beast to control. Look at Japan in the 90's...till now. Look at the world through the 30's. The current situation would be the only situation, and that is only so far that I can think of where deflation may have been avoided. BTI, Flow, and others would know more about that than I do though.

If we could keep inflation at 2% people would be happy. Lets face it, speculation(free market) is what drives inflation to such extreme levels. On that note.

Maui1, I see yo luv slogans, do you have any solutions? Right now currency valuation is generally set in the currency trading market(free market) They supply is controlled by the FED, this it true.

So are you suggesting that we let the free market decide the currency supply? Are you suggesting letting business people control the supply of money over an institution that is supposed to be set up with the US people in mind?

[silverguy25]

So, Aham, a system that has been in place for almost a 100 years. One which you admit is very complicated to anyone outside of the high financing business. Yet you seek solutions? Or do you really seek replies for which you can shoot down for infeasability? I guess I'll be the first to man up here and admit that it is much easier to rant about the current system in place than to provide an alternative.

But why should I have to? I'm not a fucking banker with a PHD from Harvard, and I'm certianly not in a position of government to invoke any change.

So in a hypothetical situation where somehow I could magically change it all...I'd go for a treasury based currency where the interest on loans of every kind get folded into government funds. I would like to see a more localized banking system that doesnt serve a larger centralized authority, but rather the needs of small business. To big to fail should be too big to exist in my humble opinion. In general I would like less debt, speculationm, corruption and to also lose the attitude of a global financial manifest destiny. Get rid of complicated financial instruments that do nothing but pass toxic assets until someone gets ripped off.

I want a system that will allow failure and "take its medicine" if you will.

Its a saying I hear frequently when I golf. It means sometimes things are out of your control, and you just got to ride it out through thick and thin...without any mulligans

[Aman A.K.A. Ahamburger]

I want solutions because there are lots of people out there that won't

I guess I'll be the first to man up here and admit that it is much easier to rant about the current system in place than to provide an alternative.

The biggest problem with currency is that it has to work for the majority of people, because most people just want to work, get raises, have nice things, eat. Not only that, but they want to do it all safe and secure. The Brits were using their central bank to attack the USA at the turn of the 20th century. The FED was created because there were several banking panics from 1865 to 1907, and there needed to be a way to protect the US from currency manipulation, and stabilize the economy which had compromised the country at least three times in the 1800's. The difference is that the FED is set up to beat the ECB, whereas the original two central banks of the USA were copies of the ECB.

You bring up some interesting points Sliverguy. BTI and I have had a conversation on how each state could have what the bank of North Dakota is. It would be a better way to regulate money that is flowing into each bank in the state, and since the currency would still be printed federally, you eliminate the possibility of each state printing money.

[itstippy]

The Fed is told to focus on two primary goals: "keep prices stable" and "maximize U.S. employment". How to measure prices and employment is not defined, so the Fed quotes BLS' Consumer Price Index and Employment Reports.

If you think about it, under these metrics even a Soviet-style economy would fit the mandate. The Central Government subsidized basic needs, keeping consumer prices stable. The Central Government made sure everyone had a "job". Eventually the demoralized and unmotivated citizens pretended to work, the government pretended to pay them, and everyone lived in drab shitholes eating coarse bread and drinking crappy vodka. Bingo. Stable prices and full employment. I don't think that's what we want. What DO we want?

Do we want the U.S. Fed to print money and bloat its balance sheet with overvalued crap every time there's an economic downturn? Run around putting out brushfires before they get out of hand, until there's so much economic deadwood lying around we get a humongous unstoppable forest fire? Provide liquidity and a Greenspan Put until even the stupidest investment vehicles find eager buyers as long as they're underwritten by a too-big-to-fail institution?

The Fed is a government sponsored enterprise (GSE), much like Fannie & Freddie. As such we need to be VERY clear what we expect of them. We told Fannie & Freddie to "promote U.S. home ownership", but we didn't clarify what we meant by "home ownership". They promoted the heck out of "home ownership". It did not turn out well.

We should be much more clear on what we want from the Fed. We should take a hard look at how we measure things. We should be able to ask the Fed hard questions and get solid answers. The Fed's role is way too "squishy" and its methods far too opaque. When Ben Bernanke vehemently claims that the Fed "is not printing money" via its Quantitative Easing programs we should demand and get clarification on just what it is doing, if not printing money and monetizing debt. It sure looks like that's what they're doing.

[frankq]

" If we tie the value of the currency unit to an hour of validly performed labor-- we get cash that is reconciled in a society. "

And how do we define "an hour of validly performed labor"? Is an hour of labor performed by a street sweeper assigned the same value as an hour of labor performed by a cardiac surgeon? Please elaborate.

[verrip1]

Fq:

The most obvious failings in the labor currency concept are:

1) How does one deal with regional differences? Does Big Government mandate that the worth of one hour of labor in Calexico is the same as the worth of one hour of labor of the exact same type in Beverly Hills? Calexico hairdressers would be happy to have mandated equity. Beverly Hills hairdressers not so much.

2) How does one deal with merit and competency raises? Or wage reductions for failure to perform or inability to adequately perform the job? Or would merit and competency rendered irrelevant? I suspect the latter would have to be imposed to attain any shred of data stability.

3) How does one keep this labor currency up to date on an instantaneous basis to permit the currency to be traded on the world currency markets?

I think it was an idea that popped into V_L's head and he posted it without thinking it through. His bad for that. In reality, it is a highly statist approach that has extremely difficult practical, libertarian, and cultural implications.

[Driftr]

Mar 25, 2011 21:59:19 GMT -5 Aman A.K.A. Ahamburger said:

Interesting concept Drifter. How would you accomplish that balance? What we know is that deflation is a hard beast to control. Look at Japan in the 90's...till now. Look at the world through the 30's. If we could keep inflation at 2% people would be happy. Lets face it, speculation(free market) is what drives inflation to such extreme levels.

If lowering rates and purchasing Treasuries/MBS/Agencies has increased inflation, I'd think raising rates and selling Treasuries/MBS/Agencies would decrease it (cause deflation).
I am not happy with 2% inflation each and every year. I'm sure you know that 2% inflation a year only takes about 35 years for prices to double the first time and will then take fewer years to double again (gotta love/hate that compounding). That is not price stability to me. In my opinion the speculation is the result of people in the free market assuming that the Feds loose monetary policies will continue ad infinatum (sp?). Once the Fed shows that it has the stones to keep prices stable, my guess is the speculation driving commodity prices as high as it does wouldn't happen to the extremes we see today.

[Aman A.K.A. Ahamburger]

I like what you are saying itstippy, accountability, that's what you were saying as well Drifter. Regarding inflation Drifter, I think what your saying would work in theory. I think to fully pull it off you would need to have a very controlled economy. The problem is that once price fall people want to have price to continue to fall.

To me the central theme is accountably in the central banks/banks. As much as we all like the free market. None of us like a deregulated free housing market, or money markets. These things don't lead to freedom, they actually promote tyranny.

[Aman A.K.A. Ahamburger]

I look around and didn't see this posted, I may have missed it though. This is what a lot of people are asking for, accountability at the Fed.

Fed Releases Discount-Window Loan Records During Crisis Under Court Order:
www.bloomberg.com/news/2011-03-31/federal-reserve-releases-discount-window-loan-records-under-court-order.html

“This is an enormous breakthrough in the public interest,” said Walker Todd, a former Cleveland Fed attorney who has written research on the Fed lending facility. “They have long wanted to keep the discount window confidential. They have always felt strongly about this. They don’t want to tell the public who they are lending to.”

The central bank has never revealed identities of borrowers since the discount window began lending in 1914. The Dodd-Frank law exempted the facility last year when it required the Fed to release details of emergency programs that extended $3.3 trillion to financial institutions to stem the credit crisis. While Congress mandated disclosure of discount-window loans made after July 21, 2010 with a two-year delay, the records released today represent the only public source of details on discount- window lending during the crisis.

[Aman A.K.A. Ahamburger]

Well this is interesting..

Bernanke in Testimony Can Show Ron Paul How QE2 Works in Markets:
www.bloomberg.com/news/2011-03-17/bernanke-in-testimony-can-prove-to-ron-paul-how-qe2-works-in-free-markets.html

[maui1]

3.3 trillion created out of thin air.............who gave them that power..........who lets the fed counterfeit 3.3 trillion dollars?

a lot of this money (?) went to banks and business outside of the usa.......again, who gave them that power?

[usaone]

They did the same thing in the 1940's.

Your just getting upset now?

[verrip1]

Though the 'Audit The Fed' mantra is supported by libertarians, the real push for the audit is the mainstream statists who want Congress to have more control over the Fed.

Maybe the current Fed structure is not the best possible type, but it has to be better than having Congress control the monetary system. THAT would be DISASTROUS!

[maui1]

They did the same thing in the 1940's.

Your just getting upset now?


really? i wasn't alive in the 40s, or i would have been upset, then.

seems nothing that is done to you gets you upset. you are the perfect subject in the kingdom, once know as the usa.

[maui1]

yep, we need the fed like most of you need more credit cards. most of you wouldn't know how to live if you didn't have one, as most of you can not remember that there was life before credit cards and the fed.

[maui1]

"Consumer spending has been growing more slowly relative to income than it did before the recession," Lockhart told an audience of business executives at the Palm Beach Strategic Forum. "I expect that this more measured consumption behavior is likely to persist."

this OBVIOUS statement from a fed president today............do you still think the fed is needed........geezzz

this is like greenspan stating that the housing bubble was contained and a local issue, in 2008, while the housing market was crumbling around him.

[verrip1]

Apr 4, 2011 15:19:21 GMT -5 @maui1 said:

yep, we need the fed like most of you need more credit cards. most of you wouldn't know how to live if you didn't have one, as most of you can not remember that there was life before credit cards and the fed.

I see the Amazing Kreskin now knows what we all think and how we live our lives.

Focus hard, maui ... What am I thinking about you right now?

[frankq]

Apr 4, 2011 15:19:21 GMT -5 @maui1 said:

yep, we need the fed like most of you need more credit cards. most of you wouldn't know how to live if you didn't have one, as most of you can not remember that there was life before credit cards and the fed.

Really? I didn't know that you were privy to the lives of "most of us".

[frankq]

Mar 27, 2011 14:31:41 GMT -5 verrip1 said:

Fq:

The most obvious failings in the labor currency concept are:

1) How does one deal with regional differences? Does Big Government mandate that the worth of one hour of labor in Calexico is the same as the worth of one hour of labor of the exact same type in Beverly Hills? Calexico hairdressers would be happy to have mandated equity. Beverly Hills hairdressers not so much.

2) How does one deal with merit and competency raises? Or wage reductions for failure to perform or inability to adequately perform the job? Or would merit and competency rendered irrelevant? I suspect the latter would have to be imposed to attain any shred of data stability.

3) How does one keep this labor currency up to date on an instantaneous basis to permit the currency to be traded on the world currency markets?

I think it was an idea that popped into V_L's head and he posted it without thinking it through. His bad for that. In reality, it is a highly statist approach that has extremely difficult practical, libertarian, and cultural implications.

I agree. I think that it's called Socialism.

[usaone]

The point I'm making is the USA has always been this way.

Nothing new and we have survived and prospered.

[verrip1]

Sometimes the arguments appear to have some basis in reality. Of course, readers have to use a filter to identify those who just simply want to dis the US, and find various excuses to do so.

[Aman A.K.A. Ahamburger]

An interesting read.

Fed QEII Answers Brazil-China-Germany Axis With U.S. Growth:
www.businessweek.com/news/2011-04-04/fed-qeii-answers-brazil-china-germany-axis-with-u-s-growth.html?campaign_id=rss_aol_news

maui1, look at the debt to GDP during the 40's and what happened after Europe started to rebuild, this time it's China, India, Africa, ect. Not rebuilding, just building for the first time.