FED - It Causes Crises it Claims to Fix


#1

The Fed was created to prevent the cycles of boom and bust, but after 100 years or so, it can safely be said that it failed its job, not only did it not prevent the crises, but instead amplified them.


#2

The Federal Reserve has done a stellar job preserving and stabilizing our economy given the restrictions of their charter and the absolute idiocy of the voters who elect unqualified morons to Congress in perpetuity.

Thank you Federal Reserve for getting it as right as possible almost all of the time.

This piece starts with a fallacy and then proceeds to so many non sequiturs and zero substantiation for its “conclusions” that it plays like something from the New York Times editorial staff.


#3

It created the boom & bust credit cycle that F.A. Hayek talked about.

It destroyed the ability for us to have 50 or 100 year maturity bonds, which weren’t uncommon before it came around.

Alan Greenspan isn’t called the “architect” of the 2008 collapse for nothing – and keeping interest rates low into perpetuity has done our economy no favors.

It just destroys our savings rate, and makes us more like the Japanese. We aren’t as bad off as they are solely due to us being a reserve currency.


#4

You forgot to mention that our salvation will be illegal immigration and letting China have their way on all things.


#5

RET, it’s not my fault you haven’t kept up on this.

I get that your busy, perhaps too busy to delve into these things very far, but if so, you should be asking questions here.

The Fed has a deplorable history; there’s no salvaging that. Letting the State have a monopoly on money was a bad idea, even when they outsource the job to “chosen” oligarchs. The existence of the FDIC equally creates instability, that acts itself out about every 30-40 years.

My industry suffered from a similar problem created by oligarchy, and this industry would equally benefit from the same dose of deregulation. We need to allow for more consumer choice.


#6

The Federal Reserve has done a great job mitigating the destructive ideas of our ignorant Congress, I applaud them for this effort and mock the “Ron Paul mental midget brigade” that demonizes the Federal Reserve as the scapegoat for their own failures.

Fortunately, economics does not need to be understood in order for the right ideas to bear fruit, the right ideas bear good fruit and the wrong ideas stagnate and bear little fruit regardless of the ignorance of anyone.


#7

I’m quoting the Ludwig von Mises Institute.

I’ll grant RET that an independent Central bank is better than a non-independent one run by Congress; less blatant cronyism that way. But not having one at all would be best. That’s the gradient as I see it. We operated better, the value of our money was better, under free banking.

You’re right about the right ideas bearing fruit, because economies with no central bank, have prospered more than us.


#8

Cool, so you and all of the other Left will be moving soon to those places that have far greater prosperity than the US I suppose?

Imagine the mass exodus that will be occurring once people realize how inferior we are to these other economies, at least our immigration problem will be over!

With such compelling arguments I suppose we will be returning to the Obama ideas in November, how on earth can we hope to respond to such air tight arguments?


#9

Hong Kong, which is more free market than we are? To include banking?

Which is why Milton Friedman loved the place?

RET, if you don’t want to keep up on the issue, that’s up to you.

Meanwhile, Austrians are winning the argument on currency, because banks and countries are shifting to crypto, most of which by design, have no central authority. An end to the monopolies, to much of the power of oligarchs, and this should be welcomed.

Yeah yeah, everything is a political issue, actual discussions on economics don’t exist.

I get it RET. You’re just like progressives, with only one mode of focus.


#10

Be sure to pop in once in awhile after you get to Hong Kong, you better hurry though because I expect most of the world’s population is already packing their bags.


#11

RET, again, it’s not my fault you don’t keep up on this.

If you want to respond to the video I posted, feel free, I’ll listen.


#12

It seems that Alaska Slim would like this country’s economy to run on a bunch of crypto currencies. I’ve already explained to him that that was tried in the first half of the 19th century and failed miserably but to no avail.

The Federal Reserve has been a great improvement over the old system. Sure they have goofed it up from time to time, like 1937 when they put breaks on the monetary system, which helped to start another mini depression. Still it beats the “Wild West” currency system prior to the Civil War.

When I pay for a good or service or receive payment for something I supply or do, I don’t want to have to do a credit check on the bank, individual or whatever who issued the privately sponsored currency. Adding that complication to the economy in the name of “freedom” is just plain silly. That’s not freedom; it’s an unnecessary complication.


#13

They didn’t have cryptocurrency in the 19th century. The technology is called blockchain, or “smart-contracts”; it’s being deployed right now by BBVA and Santander as a way to eliminate error and corruption that comes from human intermediaries, or their own employees.

With Blockchain-as-currency, you own a share in this system, and its value goes up as usage does.

Currency was more stable in value in the 19th century, that’s why we could have things like 100 year-bonds.

Recessions have also become longer in the post WWII-era, on average by one month.

Send, your knowledge is built on flawed studies from the 1950s that more recent investigation have overturned-- to the point that we now realize the “Long depression” of the 1870s, wasn’t even that long, it was more like two years.

You should take another look at all this.


#14

If Alaska Slim wants to live under a system of privately run currencies than he has a perfect right to play with them on his computer. I don’t want any part of his monetary system.

I want a dollar that is reasonably stable, like the one we have had for most of time since the Great Depression. Making investment choices is hard enough without have to worry about the very currency you will use to buy the stocks and bonds, let alone worrying about what currency will be used to pay the interest and dividends. I don’t need unnecessary economic chaos.

That’s funny. The currency of every little bank had its own value, and the reporting was done in less than unbiased sources like Neil’s Bank Note Reporter which took ads from the banks they were supposed to monitor. Yea the currency was really stable in the 19th century … NOT

The only currency that held its value with any amount of stability in the 19th century was gold.

And “one month” is statistically significant? Please …

Here’s some data for you on the length of the economic Panics (depressions and recessions) in the 19th century. The first two were during you “golden age of wild west bank currencies.”

Panic of 1819, lasted two years until 1821
Panic of 1837 lasted eight years until 1844
Panic of 1873 lasted six years until 1879
Panic of 1893 lasted four years until 1897


#15

We use blockchain to navigate satellites, manage contracts, and run logistic orders for large corporations.

What “more complicated problem” is the Fed solving, and why would it be more trustworthy or more competent at doing it?

We need deflation again (from supply expansion, which helps the economy), and we should have a choice, not a Government monopoly that they outsource to private corporations.

It also means we take away the reserve status of the USD, and punish the Government for abusing that to play fiscal games no other country could get away with.

Usher in fiscal pain, when they do stupid things? I want that, badly. It’ll moderate Federal power more than anything else we could do.

The only currency that held its value with any amount of stability in the 19th century was gold
[/quote]
Send? I’am talking about gold-backed currency, and the proof that things were better then is the 100-year bond market.

It was common back then for companies to offer such bonds. Far less so today, and we have the Fed to owe to that.

This lasted only two years, again, you’re quoting data by the NBER that’s been invalidated.

It’s not people at the time who we take this from, it’s always been the NBER, and the way they dated recessions from the 19th century has proven to be flawed.


#16

Here is my overriding response to you. You have no right TO FORCE other people to have to use your monetary policy theories. LIBERALS force other people to have to submit their ideas though government coercion. If that is your goal, I am 100% against you. I am not interested in having a lifetime of my work, savings and investments ruined by your risky schemes to undermine the value of the U.S. dollar.

“Deflation” in what sense? Do you want to lower the money supply? Do you want to lower overall prices for good and services? I can tell that has mostly happened during economic depressions, the suffering that resulted from those has been extensive. If you don’t increase the money supply along with the real growth of the economy, you will choke off the economic prosperity. Is that what you want?

No one is stopping you from playing on your computer with Internet currencies. If that’s what you want, have at it, but I want no part of it.

Every civilized country that has a central bank controls its money supply. We control ours through bank reserve requirements (seldom used) and open market operations using Federal debt instruments. Has the Federal Reserve made the wrong call? Sure, I can cite examples, but don’t throw away everything with your risky schemes.

A gold backed security … the old commodity theory of money … long disproven.

Your “gold backed computer currency” will work only if the value of the “computer peso” is equal to or more than the gold that backs it. If the value of the “computer peso” falls below the value of the gold that is backing it, there will be a run on the currency to redeem it in gold. That run will continue until the value of the currency equals its gold redemption value. If there is not enough gold to back to the currency, its value will collapse.

There is not enough gold in the world to back the world’s need for money unless you artificially set its value at an astronomical number. I’ve heard numbers kicked around like like $500,000 to a million dollars an ounce. Those numbers are probably not high enough.

All the gold standard does is limit the amount of money a government can put into circulation. That can be a good or bad thing. If the economy is growing and more money is needed to keep it going, limiting the amount money in circulation because of a government’s stock in a specific commodity will chock off economic prosperity. It’s just that simple. The Panic of 1893 was made worse by the Gold Standard.


#17

Which is what you’re doing. Why are you trying aim that at me, when you are the only one coercing something here?

Only the Fed’s usage has any sort of compulsion or manipulation by law. I’m saying we should have a choice. If we aren’t satisfied with Fed/USD monetary policy, there should be an accessible alternative.

I said it right there, supply expansion, productivity in the economy gaining. Businesses making more things, more cheaply:

Historically, benign deflation has been the far more common type. Surveying
the 20th-century experience of 17 countries, including the United States, Atkeson
and Kehoe (2004, p. 99) find ―many more periods of deflation with reasonable
growth than with depression, and many more periods of depression with inflation
_than with deflation.‖ Indeed, they conclude ―that the only episode in which there is

evidence of a link between deflation and depression is the Great Depression (1929-
1934).

It’s the data from the NBER that was disproven:

"The NBER‘s chronology has nonetheless been faulted for seriously
exaggerating both the frequency and the duration of pre-Fed cycles and for thereby
exaggerating the Fed‘s contribution to economic stability. According to Christina
Romer (ibid., p. 575), whereas the NBER‘s post-1927 cycle reference dates are
derived using data in levels, those for before 1927 are based on detrended data.
This difference alone, Romer notes, results in a systematic overstatement of both
the frequency and the duration of early contractions compared to modern ones.22
The NBER‘s pre-1927 indexes of economic activity, upon which its pre-Fed
chronology depends, are also based in part on various nominal time series which
(for reasons considered above) are a further source of bias (ibid., p. 582; also Watson
1994). "

…undertaken more recently by Joseph Davis (2006) who, using his own
annual series for U.S. industrial production for 1796 to 1915 (Davis 2004), finds no
discernible difference at all between the frequency and average duration of
recessions after World War II and their frequency and average duration throughout
the full National Banking era. Besides suggesting that the NBER‘s recessions of
1869-70, 1887-88, 1890-91, and 1899-1900 should be reclassified as growth cycles
(that is, periods of modest growth interrupting more pronounced expansions)
Davis‘s chronology goes further than Romer‘s in revising the record concerning the
length of genuine pre-Fed contractions, in part because it goes further in
distinguishing negative output growth from falling prices

While there are cryptocurrencies that tie themselves to physical assets, Crypto doesn’t have to be back by gold; more are backed by what they’re used for.

You own a share in the digital marketplace. It’s like owning a piece of Paypal or Amazon, only it’ll encompass even more functions than that.

It’s money-as-code, which has a use, you can do things with code. This means, like Gold, there’s intrinsic value to it.


#18

You do have a choice. You can put all of your assets into your “computer pesos.” If you need to pay a bill to a company that does not accept your currency, I would presume that you could convert your “computer pesos” into dollars. If you can’t, then your system has a problem.

But you don’t leave me with a choice. I would have to live under your system whether it worked or not.

As for your theory about “computer pesos” causing the supply curve shift to the right, that’s almost funny. If increasing productivity through monetary policy were that easy, someone would have introduced that horn of plenty long ago.

Tell, me how does this work? Are you vastly increasing the money supply, or are you decreasing it? My guess is you are increasing it under the mistaken notion that more money always generates increased production. Go ask the people of Venezuela and Zimbabwe how well massive increases in the money supply have worked for them. The people who have enough education to know what’s be done to them will tell you that it has been a massive failure.


#19

If your currency of choice collapses from competition from my choice, with people actively using Cryptocurrency because it maintains its value better, and can be used to do more things than USD; what do I care?

You cannot force people to stick to using your currency, just because you want them to. That’s coercion.

And yes, there’s a reason to believe Cryptocurrency is just what this represents, the fulfillment of what F.A. Hayek himself wanted in currency:

A soft-opt out.


#20

No, you misunderstood.

Targeted inflation, by its very nature, attacks deflation, regardless of how it’s caused. Reasoning that all deflation is bad.

But we know this isn’t true looking back at past deflationary episodes; they were mostly beneficial for the economy, and the Fed is currently robbing us of that benefit.

That’s the point.

A different currency, that’s isn’t centralized, wouldn’t fail to benefit from deflation due to supply expansion. It’d be a natural consequence of being regulated by market forces.