Quite a few people on this site love to debate the gold standard and see the Fed as a sort of Rothchild antichrist. And I'm no lover of the Fed. But I can't help but sit back and admire what they're attempting at least. It's fascinating stuff: the fed is now going to guarantee commercial paper. http://biz.yahoo.com/ap/081007/financial_meltdown.html Think of this and the contrast with the Great Depression. There the Fed just sat on its hands and starved the money supply and a heck of a lot of people while they were at it. But this new Super Fed is plugging one hole after another. Another leak pops out and they plug it the next day! What is so interesting is that the Fed is so active, literally making decisions in a matter of days. I've rarely seen a governmental - well, quasi-governmental body - make decisions so fast. Within a month or two, they are literally trying dozens of novel approaches. And they are actually being altruistic: they appear to be doing all they can to help the economy (and the mess that Greenspan created). One argument you read often is that the Fed is now ineffective: they no longer have control over the markets. What do you think? Can they control the contagion?
They're trying all sorts of things but not those with a proven track record or those that are starkly innovative like going directly to financing those paying the mortgages. They seem to have settled for lesser big government methods even though it means letting the financiers who got us into the mess possibly keeping their shirts and profiting.
Effective leadership would have prevented the holes in the first place. Yes, Bernanke did not inherit an ideal situation, but he clearly has been slow to grasp the issue. Ironically, he is supposed to be some sort of authority on the Great Depression, another time when central bankers were slow to grasp the situation. His best course of action now is to resign. Markets have lost all confidence in him, for good reason.
What would you have wanted him to do differently? React more quickly or actually implement different solutions?
The Feds actions are anything but altruistic. Their only purpose of existence is to do everything they can to keep the current system of government controlled money running. Politicians would rather destroy the whole economy than give up this power, and this is the only reason the Fed has such "free reins" and less red tape to cut through.
In spite of conventional wisdom, the PRIMARY goal of the Fed is to PROMOTE INFLATION! I would say effective.
Most politicians are like McCain and have a minimal understanding of even basic economics much less central banking...
Don't know how true this is, but read before the Federal Reserve Act of 1913, America had NO DEBT. Now its in debt @ 4 TRILLION dollars. Interesting. Sounds like the enslavement took place a long time ago. Althought I also read, again not sure how true it is, that there was a clause that stated Congerss had the ability to abolish the Fed. What type of financial that upheaval would cause though I don't know. If we borrowed the money from other countries, guess we say screw you. But then their goes all the foregien investment for the future and whose to say other countries wouldn't reply with military options. Sounds liek the Fed screwed us pretty good.
I agree that we were in inflation before this started and that we'll probably head there afterwards. But right now we're headed toward deflation unless the Fed can ungum the works.