I think a computer could do the same job the current Fed does now. But this still means we would have a central bank system in place. The question originally was should the Fed be disolved. I took this to mean the Federal Reserve system as a whole. I did not take it as a question on whether or not the current Fed membership and policy was effective. Perhaps our Fed could be doing better. I hardly think Greenspan is public enemy #1. I would place that designation on our federal legislative branch, with their exponentially increasing bureaucracy (and therefore wasted money). Regarless, some sort of central bank (with monetary expansion and contraction procedures) is necessary. Whether it is a computer or a group of board members is not the point. It is needed for domestic economic controls.
Fed doesnât affect long term growth, but reduces short term growth volatility. If it wasnât for Fed we would have depressions of 1929-33 proportion regularly. Read some history of US depressions in 19th century for reference.
Agree about the legislative branch. As for characterization of Greenscam as Public Enemy #1, that's actually my sugar-coated description.
Well from what I've read the FED made the depression MUCH WORSE than it would have been without their interference. And what's wrong with depressions, if millions of people invest all their net worth in boo.com then they deserve bankrupcy. That enables the responsible people who didn't get so god damn greedy the opportunity to pick up assets on the cheap and move up.
Humm... In 1929 people went to their local bank to get their deposit money... And, you know what, it wasn't there... Why? Because some banker long ago, found out he could make an extra penny by lending out those deposits... Mind you the consent of the depositors... So, things got tight one day (we're talking here, Europe, XVII century, if memory serves me right), and bankers rallied and asked the king to form a central bank, you know, to avoid these catastrophes: depositors trying to get their legit deposits... The king, who knew horsesass accepted. So, ever since then, governments have been conned to believe, that central banks exist for the best interest of the people and not the fact that they exist to protect bankers... BTW, kings (and governments) later on picked up on the advantages of coining money... Tell me, haven't banks been making a killing on spreads for the last few years? My instincts tell me that there has to be a better way of handling things. I don't see my interests aligned with banks. Do you?
As a trader let me ask you this. Lets say you can choose between two strategies. One is starting with 100$ then 101,102,103,102,104,103,105,106,103,104,105,107,106,108,109,107,109,110 The other one is 100,150,220,80,30,70,200,100,110, 150,220,80,30,70,200,90,70,150,130,110 So they both offer you the same reward but different risk. Also the second had larger cost on your nerves. You probably had lot of manic â depressive behavior depending of the current state. It wouldnât be surprising if you blow out with second strategy. Central bank is there to protect the system. The system is generally aligned with the ruling class, therefore not necessary aligned with the interest of majority of people. If you donât have them the chances of higher volatility is much higher. They are not perfect. The problem with depressions is they cause unnecessary pain and suffering to large amount of people. It also opens door to other alternatives to capitalism which didnât worked well in the 20th century (communism and fascism, or other types of dictatorship)
Insurance comes to mind... As a trader, I read the other day, that the losses in volatility in stocks (the market) was due to bond insurance. Some guy started selling insurance on co. bonds, and the market for this insurance has grown to huge proportions. In order to cover their fannies, these insurance companies are short options on the cos. stocks. I agree with some economists that recessions come about (at the core) by misallocations of resources, either cos invest too much too soon, or, in the wrong idea. Dot.coms and telecommunications, come to mind. These mistakes, in my view, are unavoidable. People have to make them, in order to try new ideas. You do not cross the river without getting your feet wet. But, as I have just mentioned, I think the cure is already out there in the form of bond insurance. And maybe the Fed is on the road of the Dodo... Which will make me very happy, because a lot of people think, I included, that they aggravate business cycles through their interventions. I'm a street guy, no economist, so take it for what it's worth. Good trading.
In order to really understand what goes on in the world, you have to understand that behind it all, there are two opposing forces: * The industrialist, where its greatest icon was Rockefeller, and * The banker, remember J.P. Morgan... In essence, Mr. Rockefeller likes inflation, buys cheap, sells at higher prices. The repayment of his loans is made with worthless dollars. Mr. Morgan, on the other hand, likes to get his loans paid out. This is why he will protect the economy, as any central banker, but he likes to recoup his loans with dollars of the same value. If you read history, from the right guys, you will find, that these guys have fought over the control of government through politicians and bureaucrats. And their control has been very extensive, including presidents.
Interesting Commentary...... If a country prints money...it must have a Central Bank... What this is about mostly are foreign currency valuations...Each country continually attempts to control their currency's valuation by core interest rates.. Its all about C+I versus other C + I 's.... The worldwide consolidation of manufacturing and labor is exasperating this phenomena... Each currencies periodic TR "total return" positive against their major currency partner is the constant chase... ....................................... One of the biggest and most harmful taxes in the US has been its establishing such a low reward for savers...which in the short run helped us wobble away from the several trillion dollar loss in 2000-2001... This tax was in effect...the equivalent of taking 6 of the 7 points given on savings interest paid....Monetary policy is sometimes more devastating than tax law changes... ................................. No economy can stay stationary on a currency to currency basis...as their governments will continually react versus the other...representing the interest of their economies.... which in turn...makes for interesting TR currency plays..... ....................................... This talk about how the US underpinnings support a future weakness in dollar pricing....ok compared to whose currency...for how long...and why... Sometimes the comparisons are not for who is doing well...but who is doing the " least worst"....
The issue at hand is that it's very unpopular for the government to face voters in an economy that requires to reduce the cost of the labor component due to a loss of competitiveness, which presents itself in a weak economy. In order to achieve this, salaries would have to be reduced. Or/and, alternatively, employment curtailed. It is much easier to lower the currency value, in order to stay competitive. This is why governments are constantly tinkering with their currencies. But, like you inferred, the tinkering is not free, somebody has to pay the price, and it's more than anybody else: the bond holder. You see, the central bank gets to buy first, the last guy in line is the one mostly hurt due to the diminishing value of an expanding currency. At the least, the process is unethical, somebody's pockets are being picked...