The Treasuryâs decision to give the Federal Reserve and the Federal Government more power is evidence of their next large step into moral decadence. What a disaster. This brings us that much closer to the nationalization of our banking, mortgage, and insurance industries. Why donât people realize that what we need is LESS regulation and not more? Government intervention is not the solution â it is the problem. They can ONLY make things worse with all of our tax dollars. To fully comprehend the current turmoil, one must have a clear understanding of the role of the Federal Reserve and the clear moral hazard their spastic policies create. Moral hazard is a situation created when a party is protected from risk and thus behaves much differently than it would if it were fully exposed. The moral hazard created by the Federal Reserve policies of bailout is enough to send our country down a slippery slope of economic subjugation. The Fed was idyllically created to promote price stability, prevent financial panics, and smooth out the amplitude of the business cycle. Ironically, and unbeknownst to most Americans, it is Fed policy which is enormously responsible for the boom and bust economic metric. Interest rate reductions, money supply manipulation, currency intervention, and interference in the private sector are not the marks of a free market economy. The Fedâs mandate is not to bailout the freaky risk takers on Wall Street and beyond. The Fed needs to get out of the way and let banks, hedge funds and mortgage firms to fail. Thatâs called free market capitalism and itâs the only truly âfairâ economic policy. What we are witnessing today is radical fiscal and monetary socialism. Only a hands-off approach will encourage big business CEOâs to self-regulate and take personal responsibility for their firmâs actions.
Excellent post. It seems to me the fed creates the problem, but given that most Americans are financially illiterate, they don't understand it. Now, the fed and govt make themselves appear to be the knight in shining armor coming to rescue the people from the very problems they helped create.
Lets just give ole' uncle Ben total control of all aspects of our financial system. Turn over our credit card bills and checking accounts and he'll just take care of all of us. We can just have a little rfid device implanted in all our hands and benny boy can keep track of all our wages and expences. Ring a bell to anyone?
I must say that I find ALL of these FED BASHING threads on ET to be rather amusing . . . Tell me, is it also "free-market" capitalism and "fair" economic policy to allow investment funds to leverage up their holdings to the tune of 33:1 ? There are a number of people here on ET that have been highly critical of the Fed and Chairman Ben Bernanke, yet it is clear to me that even these posters have very little knowledge base when it comes to the magnitude of the banking system issues today, let alone the leverage that was allowed to occur that lead to these current problems. They cry moral "hazard" and rant and rave about how horrible the current actions of the Fed are in trying to avoid a total DEFLATIONARY collapse of the banking system - - - yet they never provide or present a solution to the ongoing de-leveraging of our banking system. These same critics are the ones that wish to abolish the Federal Reserve. That would be fine and dandy if our Nation had a savings rate that was worth a damn and could help create capital formation and investment. The main problem is that the recent generation of American's are anything BUT savers, and such a mentality does not bode well for capital formation. As a result, the Fed is the only entity available to stimulate capital formation, investment, jobs, and overall economic growth. I wish our Country wasn't so dependent on the Fed and Monetary Policy in order to create growth in our Economy. But until the government curtails massive budget deficits and the American public learns how to SAVE, I am afraid that the Fed is the only game in town. There simply is no "other" alternative at this point and time.
I would think that the low saving rate in America is a direct effect of low interest rates promoted by the Fed, and loose fiscal policy, and an indirect effect of the asset bubble created by low interest rates. Dumb people would do what makes economic sense. As for investment funds leveraged to the tune of 33:1, why would that be a problem? Do you think anyone would do business with them if they knew that Fed would not bail them out because they are "too big to fail"? See moral hazard chapter. Why do people think that less government and less regulation is good for capitalism, but more Fed and more regulation is good for financial markets? What is so special about financial markets?
Feds own the financial markets. They own all the money in the banks, they own your balls, they owned your daddy's balls, they own the destiny of American people. They are guardians of our economic welfare. You do not like the Feds go live in Tibet and Bhutan and learn to bake cow dung patties for a living...
I think this will be positive. The less government agencies, the better. Plus this proposal is coming from the CEO of Goldman. He can't speak but, I'm sure he's a financial genius.
OP is saying that when it goes on like this you won't have to move to Tibet to learn that, it will come in handy here too. In fact, it could well be that in 20 years time, if not earlier, the hollowed out financial systen will follow the industrial powers that the US some time ago, and will be replaced by effecient banks from China, or maybe Tibet.
I would enjoy hearing what steps you think the Fed, or any other entity take to navigate the current situation. As best as I can tell, and correct me if otherwise, you seem to indicate the Fed do anything and everything it has done thus far and more. http://online.wsj.com/article/SB120679977389874405.html?mod=hpp_us_whats_news On a related note, in the 'be careful what you wish for' dept, if financial institutions were to disclose their positions, (as per the link above) it would not surprise me if the situation became more dire and treacherous. Needless to say, I think they are not likely to oblige, for the reasons above...I believe a negative market reaction at the very thought is likely. May explain in part Fridays action.