Why End The Fed?

That doesn't disprove what I said. I asked you to show me where I claimed that some form of regulation or law exists that says the only way the Fed can create money is out of debt. I never claimed any such thing.

 

Of course, that is one of many different reasons for the crises set out in the article.

But I'm not sure how that one supports your conclusion. Interest rates could not remain stagnant. The problem was not that interest rates went up, but that all these loans were made on unregulate ARMs that were pushed onto gullible buyers by shoddy brokers and banks, which created a trap for tens of millions who found their mortgages costs going up when the interest rates did.

Had those loans been made on prudent fixed interest rates, that would have been far less of an issue.

Edit: Furthermore, the article noted that the Fed began raising interest rates in 2004 and continued raising them thereafter steadily. In fact that interest rates were going up did little to effect the speculative housing bubble, fueled tax cut supported greed, as lenders were happy to give out "teaser rate" loans that masked the true cost of the loan, as well as shoddy practices like no income verification to buyers who had no business taking on a long term obligation.

 

Other than statutes or rules or regulations, what do you contend creates "the fact that the only way the Fed can create money is out of debt"?

 

To some extent. Since the crises I've seen statutes or regs that provide the Fed with some obligation of overseeing parts of the banking system. I'm not positive the mandate would cover this as specific as lending practices, but it might.

The Fed during that time frame was headed by Greenspan, who was a conservative with an almost libertarian view of things. My knowledge of his record is not perfect, but I believe he supported the Bush tax cuts, believed the markets could regulate themselves without Govt oversight, and encouraged folks to take out ARMs. All of which was kind of foolish and certainly didn't help things, IMO.

 

The low Fed Funds Rate encouraged lending by shoddy brokers and banks...particularly ones that knew that they would be deemend too big to fail and bailed out by taxpayers. The low interest rates to stimulate borrowing was done to improve the housing situation - for the greater good of the greater number. The Fed raising the Fed Funds Rate to put a reign on the Housing Bubble it jumpstarted caused the bubble to pop, causing millions of homes to be foreclosed on.

Ironic that a policy which was designed to increase the number of homeowners ended up decreasing the number of homeowners. For the greater good of the greater number. Which is always the result of Collectivist central economic planning.

Had the interest rates between banks been set by the market, and if taxpayers weren't on hook to bail out banks, and if many of the major banking regulations passed by previous reckless administrations hadn't been in place, it's likely the entire crisis would have been avoided.

 

Interest rates would have little to do with shoddy lending practices. See my edit to the prior post regarding the speculative bubble blowing up even as the Fed raised rates. Also note that interest rates are even lower now, but we are not seeing the type of shoddy practices that were prevenlant in the 2000 before the market tanked. Banks thinking they would get bailed out may have contributed to some of their sloppy performance. But the biggest factor was simple greed. They were making (*)(*)(*)(*)loads of money.

The problem was the ARMs. If the bulk of the loans had been fixed rate loans not suceptible to rate changes it would have been a different story for many. Many other factors other than interest rates caused the foreclosure wave, including millions losing their jobs and taking a hit on income.

Or in this case, a Govt that was all too eager to turn a blind eye on its duty to regulate while the market was self destructing from its greed induced feeding frenzy.

Pure speculation.

I agree that de-regulation has allowed certain banks and financial institutions to get too big to fail. They should be broken up.

 

I agree. But I would argue we need to remove the Fed and then replace it with an old-school central bank like the Second Bank of the United States was.

Our current system isn't a true central bank -- it's more like a cronyist corporate one.

 

How was it different and why do you contend it was better.

That IMO more accurately describes our Govt these days, particularly on the Republican bench.

 

It had its problems just like the current system, but the advantage to a fully nationalized structure is that it can be more directly limited via legislation. Regulation is more difficult with a quasi-governmental structure like the Federal Reserve because of the inherent conflicts of interest.

A hypothetical "Third Bank of the United States" wouldn't necessarily have to set interest rates but could instead keep the money supply tight. All this talk of debt ceilings could be resolved by having a truly central bank put firm limits on the money supply.

 

That really doesn't tell me much by which to make an informed analysis. What is a fully nationalized structure? How could it be more limited by legislation? Why is regulation more difficult with the Fed?

 

I misspoke when I said "fully nationalized." It was almost fully nationalized in that it was a private company chartered by the government.

Still, the scope of the First and Second banks was a lot more limited. They just held tax money and made loans to the government to cover deficits. They didn't have the power to set national interest rates. The rates they had certainly influenced rates elsewhere, but it wasn't as regimented as the way Fed Reserve handles it today.

With the Fed, you have a quasi-governmental institution that sets interest rates while employing executives (or beneficiaries) of the same banks these rates affect. The First and Second Bank had managers that were more like civil servants.

 

That sounds even worse than we have now. Do we want the central bank to be a for profit organization?

Did they control the money supply?

Interest rate policy is set by the Fed Board, whose members are appointed by the President and the majority of whom are not from banking backgrounds.

 

It essentially already is. AIG showed us that members of the board could profit from CDO schemes.

They did. We still had bubbles, but both the First and Second called in loans to try to keep things from going too crazy. Both of them failed to be renewed in their charters, but a lot of it had to do with expensive wars (War of 1812 led to the Second Bank) and politics (Jackson vs. his opponents).

Fair enough.

 

Members of the Fed board? How so?

Not much has changed.

 

Watch that video. Inside Job is a really good film. Seriously.

It's not some crackpot Zeitgeist thing either. They interview a lot of people connected to the whole crisis. They start with the Reagan era and move forward from there to show how it all came to be.

A big part of the fiasco centers around the Gramm-Leach-Bliley Act. I realize that's not related to the fed itself, but it set the stage for a lot of problems.

They talk more about Ben Bernanke, Paulson, and Geithner about 3/4 into the film.

 

C'mon, man, poverty was the RULE in the 19th century. We didn't begin to see signs of a middle class until after 1913.

 

The Federal Reserve controls the money supply. Throughout the 18th & 19th Centuries, the Rotschild family came to dominate all World Banks. In 1913, the Federal Reserve Act and Revenue Act were put into place.

Controlling the money supply enables the FED to directly impact political leaders and countries. Rothschilds perpetuated numerous Wars, as violence causes DEBT which is equitable to profits for Bankers. If the Treasury had the ability to Print Money equitable to the amount of Goods & Services in the economy, inflation would be controlled and excess taxes would not be necessary.

The system allow the FED to print money out of thin Air and then profit when the People must make interest payments. It basically transitions our sovereignty to banking elites. Rothschilds control all but 3 or 4 of the Worlds Central Banks, part of a vision for One World Order. Not controlled includes Iran, Cuba, and until recently Iraq.

People call it a conspiracy, but look at America today. The system has made us slaves. The Bank can take our homes, cause Wars, and control the business cycle with access to credit. These elites have gradually established more and more International Organizations (NATO, UN, IMF, Leader of Nations, ect) to reign in control of the average citizen. Stealing our civil liberties the last step to achieving complete consolidation.

They've bought the major media outlets. When Glenn Beck got onto this topic, he was axed at Fox News. The media focuses on sexual deviance of politicians, Wars on Women, ect and completely avoids the Elites pulling the strings of our economy. The polarization between Democrats & Republicans allows the system to continue, as the citizens fight over questions of minimal importance rather than realizing the Private Central Bank is violating every principle of our Republic.

 

Artificially low interest rates always encourage artificial excessive lending, if the velocity of money is high enough.

The housing bubble was already noticeable years before the Fed raised rates, as early as 2001.

That's true, because the velocity of money is not as high now as it was in the early/mid 2000s.

A moral hazard always contributes to sloppy performance.

No amount of legislation will ever get rid of greed.

The ARMs weren't the problem, they were the symptom of the moral hazard environment created by government regulation.

The Fed jumpstarted the housing bubble. Your own source indicated that it was an early factor in the housing bubble forming. The Fed, plus countless other banking regulations passed over many decades by reckless administrations, created the moral hazard environment in which the housing bubble formed. It had nothing to do with a lack of regulation of the market.

The prospect of failure alone would have prevented many of the shoddy lending practices by leading financial institutions.

Too big to fail is a concept generated by the moral hazard of government regulations such as bailouts. It never occurs in a de-regulated free market.

 

Partisan nonsense. Obama has sold his soul to his corporate masters.

 

But not necessarily the shoddy practices that caused the damage.

In 2001 the bubble was within historical norms, and the data is not immediately available.

Which is because that lenders, having been bitten by their greed, have over-reacted the other way.

I don't get your point.

Correct.

ARMs absolutely were a problem. If folks had fixed rates, then increasing interest rates would have little affect on them. The fact so many people have ARMs remains a huge problem today. A mortgage should be protection against inflation and interest rate variations, but millions are at the mercy of short term interest rate fluctuations on their long term investment because of ARMs the were pushed into or allowed to get. This changes a mortgage into a stable cost into something that can vary widley - a much riskier proposition.

Wiki presented a list of all the arguments for the housing bubble. Whether they were truly a cause and how much of one is a matter of debate. Having said that, I agree that lower interest rates have an effect on making housing more affordable. However, this is especially true when lenders are using gimmicky thinks like teaser rates and ARMs that directly relate to short term interest rates, as opposed to long term fixed rates, which are more marginally affected by interest rate policy.

That is speculation, undermined by the fact that the market focuses on short term gain over long term stability. Greed has a way of blinding people to actual risk, obvously evident in the housing bubble.

Of course it does. You are just semantically changing the defition by saying nothing is too big to fail.

 

The Dems have their interests as well, I agree, but I don't agree that they are slaves to corps and big business in the same way Republicans are.

 

sucker born every minute.

 

A nutjob too.

 

don't be so hard on yourself.
Child like gullibility doesn't make you a "nut job".

 

I was thinking the same about you.