What would happen if the USA government abolished the Federal Reserve? By abolished I mean seized all assets and responsibilities of the Federal Reserve so that it was the USA government that printed U.S. Dollars and not the Federal Reserve. If the USA declared the Feds unconstitutional and abolished it would the large % (~45%) of the national debt owed to the federal reserve be gone too? Pie Chart of National Debt: http://www.optimist123.com/optimist/2007/08/an-800-billion-.html
Always, always remember that if there a range of possible solutions to a major problem, the federal government will choose the worst possible solution that will plague our country for generations to come. If there is one thing you don't want in this life it's the Uncle Sam running the money supply. The Fed isn't perfect to say the least - I personally believe they cause some of the economic ills we experience - but they're largely working for the banks and the banks have a vested interest in a reasonably healthy economy. Also, keep in mind that the rest of the world runs their economies the same way, i.e. with a reserve system, and many are highly successful. The fact we have failed of late does not mean that reserve systems cannot work but rather that we have some underlying lessons that we have ignored...
letting uncle sam take over is the same as giving people like bush the freedom to completely sell out america.
The federal reserve should be a computer, increasing monetary supply at 2% per year. Just imagine a world where interest rates are set by the demand for loans against available savings.
There's a lot of uninformed opinion around this site especially around economics. First off monetarism ala Milton Friedman failed miserably in the middle of the last century. It has been tried and it didn't work - controlling the money supply doesn't work and infact, it can't be done (international capital flows, globalisation, etc..) There's a lot more to Monetary policy and economic policy as a whole than interest rates. When you set the interest rate the money supply is determined endogenously; you could say the price determines the demand and that supply is effectively inelastic and unlimited. I'm not so sure the Fed has failed. I'd say the number one culprit for the housing bubble and virtually every other bubble is the American public; Joe Sixpack. The Fed's role has effectively become that of a babysitter - protecting the people from themselves. It used to be that economic theory's justification for intervention in free markets was market failure, essentially protecting individuals from exploitation from firms, but that's obviously changed. The problem lies with the attitude and mindset of a nation, something that's very hard to change. Things like the Marginal Propensity to Consume, Import and Borrow have got out of control and the Fed only has a very limited influence on these things. When someone loses their house because they took a loan that was beyond their means to pay, who should they blame? The bank to a degree, the Fed to an even smaller degree, but at the end of the day that person needs to bear the responsibility for taking a loan they couldn't pay. The Fed right now is more focused on keeping the Financial and Banking system (on which housing obviously has a huge impact) stable, rather than fighting inflation which last I checked was under 3%. I can't say I disagree because they Fed only has limited control over the price of energy because of international demand. Higher rates would slow the economy and energy demand but what would be the effects of that on homeowners, banks, the financial system? One thing we can be sure of is that Uncle Sam would screw up far worse than the Fed. You'd be giving the guy who has to pay the bills the ability to print and determine the cost of money.
You got it all wrong with the housing bubble. It's not Joe Sixpack that is whining and crying, it's the banks that loaned money to him. They all knew, Joe and the banks, that it will end up in foreclosure, but Joe just didn't care, and the banks just hoped to pass the hot potato to someone else. When rates are low and money a plenty this will always happen - it just makes economic sense.
This Zeitgeist video of the Fed is terrific.. Not sure how accurate it all is, and clearly the author has his bias, but it's scary and insane... Only 2 US Presidents have tried to get rid of the Central Bank..Ron Paul will be the 3rd...