A rift at the Federal Reserve?

A couple of comments here: The Fed usually acts in lockstep behind the Chairman, and under Greenspan most (if not all) FOMC votes were unanimous. Bernanke has encouraged more debate and a plurality of opinions (good) but this could be leading to a more serious rift (and lets hope it cracks that evil institution in two).

The issue seems to be the interest rates: when to raise them, by how much, to what extent, etc.

The Fed is caught between a rock and a hard space. If it keeps rates low forever, the dollar will collapse for good as the world's reserve currency, the US will be at risk of hyperinflation, while at the same time imported goods (i.e., almost everything) will skyrocket beyond the ability of normal Americans to pay. Whatever is left of the US standing as a "superpower" will collapse, bases will close everywhere, and military will return home, angry and jobless. Social security and whatever medical care checks are given out will likely be not worth the paper they are printed on. Granny will have to chose between eating catfood and sewing up the ripped colosotomy bag, or getting a new one and going without the Fancy Feast that evening. Meanwhile shevles will be emptied, there will be literal lines for food and basic necessities, businesses and retailers will go bankrupt. Chaos.

If they raise the rates, they put additional budens on already-stressed borrowers, be they consumers, companies, or the government. All are deeply indebted already, and additional interest will be the very heavy staw that breaks millions of camel's backs. Comapneis will choke off what little hiring they are doing, millions more houses (not just "deadbeat" cases or those with exotic mortgages) will be forced into foreclosure, further putting downward pressure on the already-moribund property markets. Businesses will not be able to borrow money they need to ride out or innovate in the face of of this storm, etc. etc. Chaos.

You can't have both high and low interest rates. Trouble is, they seem to lead to the same place: Chaos.

Snippet from the article:

Fissures are developing among policy makers at the Federal Reserve as they debate how and when to start raising the benchmark interest rate from its current level just above zero.

With Fed officials forecasting that unemployment will average 9.8 percent in 2010, nobody appears to be arguing that monetary policy should be tightened anytime soon. The central bank’s official mantra continues to be that the overnight federal funds rate will remain “exceptionally low” for “an extended period.”

But Fed officials have hinted at new disagreement in recent weeks. The arguments go beyond the traditional split between hawks, who worry that easy money will stoke inflation, and doves, who contend that unemployment is the top problem.

The more devilish debates are about how fast to act once the decision has been made, and how to carry it out. Beyond raising the overnight federal funds rate, the Fed also has to unwind $2 trillion in special programs that prop up paralyzed banks and credit markets.

Where Ben S. Bernanke, the Fed chairman, stands in the emerging argument is a question mark. At a conference held by the Fed on Thursday evening, he assured economists that the central bank had a detailed list of tools to reverse course but offered no new hint of when he planned to begin his exit strategy.

“When the economic outlook has improved sufficiently, we will be prepared to tighten the stance of monetary policy and eventually return our balance sheet to a more normal configuration,” Mr. Bernanke promised.

Any move to tighten monetary policy over the next year or so could set the stage for a clash between the Fed and the White House. The Obama administration has been outspoken in saying it does not want a quick end to stimulus policies, whether fiscal or monetary.

Policy makers are haunted by the results of previous miscalculations. Mr. Bernanke and others have warned that the central bank should not repeat its error in 1937, when it raised interest rates too early and helped extend the Depression for several years.

At the same time, officials at the Fed are acutely aware that it has been widely blamed for contributing to the housing bubble and the financial collapse by keeping the cost of borrowing too low for too long after the recession of 2001.

One hint of the discord came Tuesday, in a speech by Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City.

Though he stopped short of calling for immediate rate increases, Mr. Hoenig made it clear that he was getting impatient.

“My experience tells me that we will need to remove our very accommodative policy sooner rather than later,” he told an audience of business executives. “Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy.”

More at source
www.nytimes.com...


[edit on 10/13/09 by silent thunder]

I too strongly dislike the FED, however, you must realize, It's fake money, is all we have, once its revealed its always been worthless and everything we own is actually owned by someone else, by proxy, or another means, then the any notion we had that we WOULD survive if we tried hard enough in life through school, work, retirement so on has all been futile and at the cost of what? mainly peoples happiness. Think about it long and hard, do you really want the FED to be destroyed?

Send this country into chaos by destroying the FED, there will be a need for creating a NEW currency, and then having the same charade repeated endlessly for future generations. IN ORDER TO FIX IT ALL, we must start over, but the PTB won't allow the people a say on how "It" is started over. Can any one say pre-cursor for NWO establishment in America under the guise of saving the economy? think about it. WHY has the CHOCOLATE MESSIAH been appointed to the HEAD of the U.N. he literally is a NO BODY, sure he went to some fancy school, He was a cop out senator for 3 years!!!! can no body smell the bull sh!t, or do some people just enjoy the smell of fresh cow feces?


Edit: You made changes as I was typing, looks like we are on the same page haha, just backing you up now i guess

[edit on 13-10-2009 by clever024]

Originally posted by clever024
I too strongly dislike the FED, however, you must realize, It's fake money, is all we have, once its revealed its always been worthless and everything we own is actually owned by someone else, by proxy, or another means, then the any notion we had that we WOULD survive if we tried hard enough in life through school, work, retirement so on has all been futile and at the cost of what? mainly peoples happiness. Think about it long and hard, do you really want the FED to be destroyed?

Im sorry if I didnt read your post the way it was intended(and if so tell me)but...

If our money is fake(and made up)money, then that would mean the entire planet who uses currency produced the same way, would be just as null and void as ours. So in the end, if our money is fake, and everything we own belongs to someone else, than that would mean nobody owns it, since money is made up. So China would be SOL in trying to take what we "owed" them.

If Im wrong, please, give me a lesson, I love to learn.

reply to post by Common Good


Its not backed by anything tangible except basically I.O.U.'s The FED is a private institution that actually OWNS just about everything now, and you are right and wrong about China being SOL, we are OWNED by China, why do you think we are becoming like our OWNER/MASTER (not talking about the people, more specifically the countries Order of Operations). When China wants us, they just say cough up what you owe us, oh you can't pay, well we will settle this one way or another I.E. Your land and/or war. Do some research on the FED and how it operates..... Its smoke and mirrors, and obviously, the smokes clearing, the mirrors are cracking, and soon whats behind the mirrors will be shown for what it is or at that time was

S&F.

I think the Fed has to raise rates around the same time as other central banks (not in lockstep, but they don't have a very big window, either) or the USD will be done. The fact that central banks globally have virtually reversed their holdings, favoring the euro and yen over the USD seems to indicate that those outside the US think it highly likely that the Fed either cannot or will not be able to do what needs to be done to protect the dollar.

As an aside, I will also point out that one of the Fed's charges is to conduct monetary policy to achieve maximum employment. With the 'real' unemployment rate now estimate around 25% by some, it would seem they have failed their charter in that respect.

It's not so much that our money is fake, but it is based entirely on our CREDIBILITY.

It's a reflection of the American citizen. That we are good for our money.

Credibility is so very difficult and longsuffering to obtain, and yet it's so easily lost.

Obama, the Congress, and the Fed are rapidly squandering our Credibility - and thus our money. Or vice-versa.

Too much spending, too much money supply, too much tax burden, and too few production means.

Pull some of the money supply, tax SPENDING - not production, and our economy along with the value of our money will soar.

This Washington crowd are the dumbest, most disastrous, pocket-stuffing retards in the annals of American history.

This could all be fixed so easily.

But you can't simultaneously stuff your pockets and do your job at the same time.

Originally posted by kreinhard
S&F.

I think the Fed has to raise rates around the same time as other central banks (not in lockstep, but they don't have a very big window, either) or the USD will be done. The fact that central banks globally have virtually reversed their holdings, favoring the euro and yen over the USD seems to indicate that those outside the US think it highly likely that the Fed either cannot or will not be able to do what needs to be done to protect the dollar.

As an aside, I will also point out that one of the Fed's charges is to conduct monetary policy to achieve maximum employment. With the 'real' unemployment rate now estimate around 25% by some, it would seem they have failed their charter in that respect.

Thanks for the S&F.

In the late 70s, we were in similar straights until Paul Volcker stunned the world by jacking up the interest rates into the double-digits and surprising everyone around the world. The result: a few years of pain and howling, followed by a massive 20-year boom.

Obama hired a now-somewhat-doddering Volcker to be part of his economic team. The problem is, since he doesn't agree with the rest of the Goldman Sachs Alumni Society making policy these days, he is being ignored and sidelined.

We MUST raise interest rates to save the dollar, as you noted, as well as the increasingly-tattered reminants of US reputation as an economic powerhouse. Trouble is, we are WAY too indebted for the Volcker treatment these days. It would cause millions of individuals and businesses to go bankrupt, flat out, given the amount of debt they already have. Not to mention it would crimp soaring government borrowing, which seems to be necessary these days for even basic functioning of the most rudimentary govt processess (i.e., keeping the White House heating and plumbing in working order....to say nothing of all our "stimulus packages" and brave-new-world spending plans, real or imagined). So I don't see an easy way out of this one...

reply to post by silent thunder


So it begins...is that term overused? It seems like this is the beginning, but I dunno, it could be the end game or mid-game, who knows.

reply to post by clever024


Yea, I understand how the federal reserve works, I was just saying "if it does" according to the article. What I was asking about, was debt. How can you owe somebody something, if both of those currencies are null and void. China cant own anything here if we cant, since we are both running on the same type of currency(monies backed by nothing)
I am not sure how much monies we have that is actually backed by actual goods, maybe 9%. So that would mean China(theoretically) would only get part of that 9% if we were to pay up.

Edit-the 9% is a made up number by me cause Im not sure at the moment what the real number is. "And we will have to leave it right there"-CNN

[edit on 13-10-2009 by Common Good]

This is precisely why we need the FED gone. Central control of interest rates is an exercise in futility-and another argument for leaving the function of interest rates to the Market.

reply to post by silent thunder


Low interest rates will not be inflationary until more money starts to move through the economy. 80% of americans spend everything they make already. They are tapped on credit as well. As they pay off their debt they will do less consuming rather than more. Rates need to stay low until that happens. Right now the worry is deflation as least on a domestic level.

I personally feel that they shouldn't ever raise rates much. I could see a permanent 2% funds rate. Economy would be adjusted by raising/lowering banks reserve requirements. These would be incremental and designed not to put undue pressure on banks. Fixed interest rates would take away one tool the rich and powerful use to seperate us from our money.

I have studied inflation long and Fed funds rates long and hard and bouts of inflation always begin with the FED raising interest rates. They say they are trying to control inflation when in fact they are the ones causing it. If raising rates worked to curb inflation, you would be able to point to some instances when higher rates actually lowered inflation. There aren't any to speak of. The reason for this is simple - higher rates raise the cost of doing business and using credit. These costs are passed on to the consumer through higher prices. The Fed interest rate agenda has always been a lie. if they wanted a stable economy they would keep rates stable.