What would happen without the FED?

What the hell is a "rational" market?

You're talking total nonsense and don't even realize it.

People invest in things; some make profit, some don't. The reasons are complex and can't be reduced to catchphrases like "rational". That's just talking point meant to valorize your view of the rules you want (i.e., pro-owner rules). It has nothing to do with rationality.

 

Is this your way of admitting your ignorance of basic economic terms and concepts? I mean, Iriemon and I may disagree often and vehemently, but at least he can comprehend basic economic concepts like supply/demand and equilibrium.

My position is that absent the intervention of government, prices would have attained equilibrium, malinvestment would have liquidated, and the recovery would have ensued. How, exactly, this would have transpired is irrelevant speculation.

It's going to take a long time because the government is propping up failed banks and toxic assets. That's obvious to anyone with an understanding of economics 101.

 

We used to. It resulted in the Long Decession of the 1870s and general economic stability that reduced the wealth of the nation.

So why would we want to repeat that mistake just to satisfy your market evangelism?

 

LOL -- I'm going to make you pay for that admission! : )

 

Can you think of a reason why banks wouldn't dump their foreclosed inventory on the market. Think hard! It doesn't involve the Fed at all.

Can you think of another reason why a bank that holds not only foreclosured property, but the mortgages of the surrounding property might not want to immediately sell all its foreclosed property.

Think really hard. It doesn't involve Gummit. It involves markets.

 

I much rather convert them to gold and silver!

Psssst....you are forgetting I am canadian.......so I dont have american dollars

 

Capital is wealth.
Is credit wealth?
No, the opposite of wealth

 

I'll take your worthless Canadian dollars. I love fiat currency!

 

I would not pay too much attention to Landru Guide Us in the macro-economics threads since he actually typed the following a few weeks ago:

'If the US printed dollars, it would have no debt.

So try to keep your discredited memes straight.'

http://www.politicalforum.com/4455243-post131.html

 

Because capital would be priced and allocated on the basis of supply and demand.

The suffering is an unavoidable consequence of the asset bubble, and it will persist as long as prices remain artificially inflated.

Makes you wonder why the central bank didn't just pay for their mortgages. This would have helped millions of Americans while shoring up the assets underlying all that toxic paper.

I don't want them to be in that position but it is necessary remedy to the credit binge. The good it would do is that it would precipitate a sustainable recovery. The contraction would be acute but short-lived, and we could help them through it by lowering people's tax burdens and creating a business friendly atmosphere in the US.

 

you wont be saying that when the currency crisis hits

 

One whose pricing and allocation mechanism is based on supply and demand.

If rationality has nothing to do with it, then you should tell people to stop saying that markets are "irrational".

 

The implicit assumption in your assertion is that the overall price of capital will regulate speculation in a specific market.

The mid 2000s housing bubble wasn't something that we saw through the economy. The economy was not in a superheated growth mode, the stock market was up a bit but not the multiples we saw in the housing market, and overall prices were not rising beyond the target rate.

The problem wasn't that there was too much capital. The problem is that the capital was all being directed towards this speculative investment bubble as opposed to say, production and investment.

When our tax code taxes investment income at less than have the rate of earning, should that be any surprise?

How do you know its not artificially deflated because of overreaction by banks and lenders?

The cost was too high.

How would putting more people underwater in the mortgages "precipitate a sustainable recovery"?

Lowering the tax burden would be OK, unfortunately we were dealt a situation where our previous leaders left our Govt trillions in debt before this all started.

 

The Long Depression was caused by the collusive relationship between the government and the railroad industry. The sweetheart land grants and subsidies that were handed out by the Federal government are what precipitated all the speculation and financial chicanery that caused worldwide markets to contract. It had nothing do with the monetary system in place at the time. Of course, the Great Depression was more severe than the Long Depression, and that occurred under the auspices of your beloved central bank, just like our previous economic collapse.

 

That isn't necessarily rational at all. The market is people. You are assuming that people act rationally. Often they do not. And it's not even because individuals act irrationally (though they often do) but mass actions reinforce irrational behavior.

 

even when markets act irrational they eventually correct....ie the housing bubble.....and now the dollar bubble that will burst soon enough

 

I don't have time for your stupid little games. Make a point or get lost.

 

If a volcano erupted in Manhattan, you'd blame big gummit.

If you only knew how ridiculous you sounded.

Fact: one of the causes of the Long Depression (and the reason we ultimately set up the Fed) was the rise of private currency during the Free Banking Era. The Long Depression came shortly after the crack down of private currency, but it was the instabilities it set up that contributed to it.

 

They react irrationally the opposite direction.

Greed an panic drive the bubbles and the boom/bust.

 

You really don't know do you?

How perfect.

Banks have to inventory their foreclosed properties because they also own the mortgages on neighboring properties. If they dumped the foreclosed property on the market "to bottom out the prices", the solvent properties would suddenly go underwater, and they would be holding useless paper. This would without a doubt lead to a huge crisis, as there would be a sudden reversal of their balance sheets, not to mention the fact that actual losses would follow as homeowners that today could sell the properties and pay off the morgagaes, would have to short sell. Dude, banks would fail because of this.

You really don't understand this?

The banks are forthright about it. They don't plan to unwind the foreclosured properties for a long time, Fed or no Fed.

 

The entire FED system was written by private bankers, to benefit a selected few bank houses, and is only government to the degree of a mask to trick public who don't trust in private banking. Yet another situation of "everyone is right, while everyone is wrong".

 

What do you mean by "correction"?

The rules of the market produce certain pricing structures. Different rules, different outcomes. This is good or bad depending on what you own and what you're buying.

There is no objective standard to claims about bubbles and corrections, except that after the fact, the people that lose quite understandably see the thing as a bubble. And the people who make money on their losses see it as a correction.

But the terminology has hidden assumptions which I'm not letting you get away with.

 

I heard it was run by evil Jews who started WWII.

 

Have you read the Federal Reserve Act. Leaving aside the bank relations, it's actually quite simple. And a good law. It's resulted in the largest economic growth on the planet for us, and helped end the Guilded Age and its unsustainable concentrations of wealth in the hands of a few.

Here's a concept: access to credit is a good thing for working people!

 

Please. The system of the FED is as genuine as "Obamacare". When the "state" needs legislation on banking, the go to bankers to write it. When the "state" needs legislation on health care, they go to health insurance companies to write it. When the "state" needs legislation for oil, the go to big oil to write it. If anything, America has no government.