Perhaps this is crazy, but maybe we should get rid of credit all together? Thou shalt not lend upon interest to thy brother; interest of money, interest of victuals, interest of anything that is lent upon interest: Deuteronomy 23:19 ... Nah, I'm just kidding. Then the Eurodollar market would disappear and I would have nothing left to trade. Also no one would own a house. Oh wait, no one does. -_-
Woa! Slow down, Guy. Your logic needs some work. Credit and money are essential. A barter system would take us back to the Stone Age. The difference between prosperity for everyone and prosperity for Bankers, lies in how that money and credit is applied. The FED was just a natural evolution - a consolidation, if you will - of credit issuance, from many Private Banks to One Central Bank. And many of those Private Banks prior to the FED were owned and controlled by the Same European Families who own the FED now. The FED was about Institutionalizing a Money Monopoly under Government Law. Was the previous system any better? Hell NO! Both systems - pre and post FED were and are inherently corrupt. Why? Because the Bankers engineer the booms and busts by inflating and deflating the currency to extreme levels. Then ride it all the way up or down. They are the ultimate insiders because they control economic activity via money supply. What was it Jacob Rothschilds said? Give me control of a nations money and I care not who sits in its Thrown. These engineered busts are just manufactured garage sales for Bankers to buy up private wealth and equity for pennies on the dollar. Whose panic selling as the Market Crashes? The Bankers? Nope. Your parents. My parents. Regular people who work for an honest Living. Whose buying at Market Crashes? JP Morgan in 1929. For pennies on the dollar. They drive the market to extremes then buy or short accordingly, and drive it to new extremes via interest rates. This Bubble Economy is designed to be unstable. Its that instability and leverage that allows the Bankers to profit from the publics ignorance. To create a bubble by releasing untold credit, then burst it by taking it away....
Achilles28, from your comments I get the feeling you are suggesting some kind of conspiracy is at work involving some nameless European banking families who control the Fed by influencing the Fed to raise and lower the money supply at their whim. Correct? If so I don't think pointing out the contradiction inherent in the idea of engineering instability or a whole host of other issues is going to make things any clearer for you. If you think "they" are out to get you, I don't think I'm going to change your mind.
Your ignorance is astonishing. Lemmie guess, you've never heard of the House Banking Committee Staff Report of August 1976: Federal Reserve Directors: A Study of Corporate and Banking Influence? European Ownership of the FED by Rothschilds, Loeb, Schiff and Warburg is well documented (by your own Government, no less). As for poo-pooing all this as "conspiracy talk." Your founding fathers fought and died to keep European Bankers out of America. They knew the money scam and wrote it about it profusely. How bankers create booms, busts to confiscate private wealth. I strongly suggest you go educate yourself.
The article is not at odds with you over this. From the article: "It is no different in unregulated financial markets, where easy credit terms almost always produce an asset bubble." I think the need to question which viewpoint is most right ends up being self-limiting here. Both tributaries feed into a powerful steam.
"Warren E. Buffett warned about a similar phenomenon during the tech bubble. Mr. Buffett said he wouldnât invest in tech stocks because he didnât understand the business model." The above is explains the Laissez-Faire system perfectly. The smart, efficient competition will always rise to the top. Who is going to call Buffett a fool because Berkshire didn't invest Nasdaq? The risky investments failed and the smart investments succeeded. That is the beauty of competition. The Fed's monopoly of credit is the underlying issue. Monopoly always leads to inefficiencies in the market. In a free-market economy, a monopoly would be quickly brought down by competition. Since credit competition is outlawed, the Fed's inefficiencies cannot be corrected. Should credit-currency be treated as other commodities, banks would be forced to compete with deposits and credit. This would stabilize interest rates at a market value. Easy money would cease, the credit lines could never freeze, and the economy would be much more stable.
The author was drawing a comparison, rather than laying blame. Which he should of done. If a cars injectors clog because the filter is old, will replacing the injectors fix the car?? The System is built to create bubbles. Thats what fractional reserve lending is all about. Further, its built on a Moral Hazard. If fractional reserve lending didn't exist and the FED didn't bailout every bank that took too much risk (in an effort to beat competition), the entire financial industry would police themselves far more, leverage far less, and bubbles would be infinitesimally smaller. Instead, we're gonna focus on a Bear Manager who bought 200 billion more in CDO's than he should have (penis envy), and say "Yea, thats why we crashed." The article postulates the invisible hand breaks down and fails to police itself when managers base performance *relative* to others. Not so. The invisible hand fails to police itself when it no longer has an incentive to do so. When bankruptcy is removed from the specter of consequence to mal-investment (too much risk), then yea, why not take on a shit load of debt? See where I'm going here.
leverage fuels speculative bubbles BUT it does not causes bubbles nor does the lack of leverage prevent bubbles. Look at the tulip mania in Holland. This among many other speculative bubbles was caused by simple human greed and fear nothing else. People always like to make it complicated when it really is very simple to find the roots and causes of what we today observe in financial markets.
and I strongly suggest you keep the church in the village, so to speak. Ownership of the Fed? Dude, you make me laugh. You should maybe spend more time on your trade ideas instead of throwing around with your conspiracy theories. A lot of you guys come up with wild ideas but you never answer a simple question: WHY and WHAT IS THE PURPOSE!!! But thanks for the amusing comments.