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The thing is, everyone rags on the Fed and for good reason, but what else do you propose should be in its place?
They rounded up the Bill Gates, the Warren Buffets of their time, and basically handed them the keys to the castle, literally and figuratively. This was in the hopes that they would act in good faith for the people, and monitor the economic status of the country, effectively finding ways to make sure we never went into another Great Depression.
Go read, "The Creature of Jekyll Island". The FED was created by businessmen of the time, who were supposed to understand money, chartered and appointed by the US Congress.
I'm not a commie, quite the opposite my friend. Go read the rest of the thread please before name calling. Plus, communists didn't have a central bank like the FED, they had a bank that was directly connected to their government, exactly what I advocate against.
Well, you haven't stated any reasoning, only your opinion.
I am certainly against central planning
More importantly, this is not for this thread, it would be better discussed in U2U messages.
reply to post by JR MacBeth
If you want rampant inflation and worthless money, although high employment and manufacturing, then sure, let the US create US notes. It didn't work for the continental congress during the revolution, "Not worth a continental", it didn't work for the states during the Articles of Confederation, it didn't work for the Union and definitely not the Confederacy, and it won't work for us now. Even Alexander Hamilton knew we needed a central bank. Andrew Jackson even succumbed to a central bank charter and history provided the necessary need to implement what we know as the FED today, way back in 1913.
I can only imagine the horrible effects on the economy that would be inevitable if the geniuses we have in charge now were allowed to print money to pay for debt willy-nilly. Imagine the social programs, the overspending, and so on. Why even pay taxes any more? Every politician could just spend like crazy and lower taxes as far as possible. We would never be able to choose a good representative(as if we can now) since every platform would be the same, "I'll give you money and not tax you for it!" ''
Yeah, lets not do that, lets keep from giving our government a blank check and a printing press. Go FED and hold the line GOP! ''
I can only imagine the horrible effects on the economy that would be inevitable if the geniuses we have in charge now were allowed to print money to pay for debt willy-nilly.
Go FED and hold the line GOP!
Yep looks like he visited ATS
My limited understanding is that the Fed as a private bank buys up government bonds and then sells them off later to recoup its investment. So in essence they would be telling a bank to burn all the investment bonds that it had purchased from the government while offering them nothing in return for doing so. That would be great if the they would be willing to do it, but it wouldn't exactly make good business sense to the Fed now, would it? LOL!
Appendix E – Money Is Created by Banks Evidence Given by Graham Towers, Governor of the Central Bank of Canada
Some of the most frank evidence on banking practices was given by Graham F. Towers, Governor of the Central Bank of Canada (from 1934 to 1955), before the Canadian Government's Committee on Banking and Commerce, in 1939. Its proceedings cover 850 pages. (Standing Committee on Banking and Commerce, Minutes of Proceedings and Evidence Respecting the Bank of Canada, Ottawa, J.O. Patenaude, I.S.O., Printer to the King's Most Excellent Majesty, 1939.) Most of the evidence quoted was the result of interrogation by Mr. “Gerry” McGeer, K.C., a former mayor of Vancouver, who clearly understood the essentials of central banking. Here are a few excerpts:
Q. But there is no question about it that banks create the medium of exchange?
Mr. Towers: That is right. That is what they are for... That is the Banking business, just in the same way that a steel plant makes steel. (p. 287)
The manufacturing process consists of making a pen-and-ink or typewriter entry on a card in a book. That is all. (pp. 76 and 238)
Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money. (pp. 113 and 238)
Broadly speaking, all new money comes out of a Bank in the form of loans.
As loans are debts, then under the present system all money is debt. (p. 459)
Q. When $1,000,000 worth of bonds is presented (by the government) to the bank, a million dollars of new money or the equivalent is created?
Mr. Towers: Yes.
Q. Is it a fact that a million dollars of new money is created?
Mr. Towers: That is right.
Q. Now, the same thing holds true when the municipality or the province goes to the bank?
Mr. Towers: Or an individual borrower.
Q. Or when a private person goes to a bank?
Mr. Towers: Yes.
Q. When I borrow $100 from the bank as a private citizen, the bank makes a bookkeeping entry, and there is a $100 increase in the deposits of that bank, in the total deposits of that bank?
Mr. Towers: Yes. (p. 238)
Originally posted by Rockdisjoint
reply to post by WhiteDevil013
The thing is, everyone rags on the Fed and for good reason, but what else do you propose should be in its place?
Replace it with nothing. The market doesn't need any central planning. Just repeal all legal tender laws and then let the free market decide what currency to use.
Originally posted by Cassius666
Well what does it mean its not real? You owe it to the federal reserve. If you repay money at an interest to the federal reserve, who gets the profits? America? Somebody else?
In the 19th century, for some time, this is exactly what happened. It was a disaster. Individual banks issued their own currencies, and when there was a 'run on the bank' and collapse, the notes issued by the bank became worthless. And of course thanks to the non-regulatory attitudes, there was plenty of thievery, scheming and bankster scamming. Even more than today.....
"The Return to Sound Money,"
1951 appendix essay
" The first step must be a radical and unconditional abandonment of any further inflation. The total amount of dollar bills, whatever their name or legal characteristic may be, must not be increased by further issuance. No bank must be permitted to expand the total amount of its deposits subject to check or the balance of such deposits of any individual customer, be he a private citizen or the U.S. Treasury, otherwise than by receiving cash deposits in legal-tender banknotes from the public or by receiving a check payable by another domestic bank subject to the same limitations. This means a rigid 100 percent reserve for all future deposits; that is, all deposits not already in existence on the first day of the reform."
...In Human Action, Mises said that the government's task is to enforce contracts. Among these contracts are contracts for redeeming money-certificates for money metals on demand. He defined a money-certificate a receipt for a money metal that has 100% of the promised metal in reserve. He said that banks should not be favored by the government. They should not be allowed the right to break contracts, which is what a refusal to redeem money-certificates on demand is. "What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual to fulfill all obligations in full compliance with the terms of the contract" (p. 443)
NO NEW MONEY IS REQUIRED
... Mises discussed the free market's use of whatever quantity of money is presently in presently circulation. "As the operation of the market tends to determine the final state of money's purchasing power at the height at which the supply of and the demand for money coincide, there can never be an excess or deficiency of money. Each individual and all individuals together always enjoy fully the advantages which they can derive from indirect exchange and the use of money, no matter whether the total quantity of money is great or small." The conclusion is obvious, and he makes it: "The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do" (p. 421).
New money does not appear magically in equal percentages in all people's bank accounts or under their mattresses. Money spreads unevenly, and this process has varying effects on individuals, depending on whether they receive early or late access to the new money. This was one of Mises's original contributions to monetary theory, one that is ignored by all other schools of economic analysis.... Mises argued that the losses of the late-coming losers are the source of income for the early arrival winners....
...This analysis of the uneven spread of new money applies to gold as well as to central bank money. ....
Mises said specifically that the sources of the economic profits of the gold mine owner are the economic losses sustained by the late recipients of the new gold. "It is these losses of the groups that are the last to be reached by the variation in the value of money which ultimately constitute the source of the profits made by the mine owners and the groups most closely connected with them." This indicates a fundamental aspect of Mises's monetary theory that is rarely mentioned: the expansion or contraction of money is a zero-sum game.... The economic benefits obtained by the early users of new money, even gold, are made at the expense of those who gain access to it after it has altered the array of prices....
GOLD STANDARD VS. STATE-ISSUED MONEY
Mises's commitment to economic freedom led him to the conclusion that the State should not prohibit gold mining and silver mining, for these are voluntary activities. But he did argue for market-created monetary standards that are based on money metals. Why? Because the cost of mining is high, which will always limit the expansion of money.... Mises regarded as the supreme benefit of a gold standard: a metallic money standard hampers the State....
Mises recognized the implications of a State-induced redistribution of wealth. The following comment came in his discussion of State-issued money. In Human Action, he wrote:
If the government-made cash-induced changes in the purchasing power of money resulted only in shifts of wealth from some people to other people, it would not be permissible to condemn them from the point of view of catallactics' [economic theory's] scientific neutrality. It is obviously fraudulent to justify them under the pretext of the commonweal or public welfare. But one could still consider them as political measures suitable to promote the interests of some groups of people at the expense of other...
It would be fraudulent, he says, for politicians to justify the issue of additional fiat money on the basis of the supposed increases in the public welfare. Why fraudulent? Because, for Mises (and for any fully consistent subjective value theorist), there is no such thing as measurable public welfare. It is impossible to add up benefits and losses in estimating total welfare because there is no objective measure of subjective utility. So, any State policy that rests on a claim of an increase in the public welfare is scientifically bogus and therefore fraudulent....
www.lewrockwell.com...