An economic, conceptual history of why Fed created, & for whom:
https://mises.org/wire/fed-not-good-idea-became-corrupt-it-always-was-corrupt
https://mises.org/wire/fed-not-good-idea-became-corrupt-it-always-was-corrupt
Federal Reserve ... Always Was Corrupt
- Thread starter Q.E.D.
- Start date
I read a lot of material that's critical of the Fed, and with good reason. However... I've never seen an explanation of why the Fed, for all it's faults, thrived after it's creation.
In a nutshell, I suspect it has to do with Gersham's law (bad money drives out good). If I want to enter a trade, e.g. buy a car, and I'm looking for something to give to my counter party... I'm going to give them the most useless piece of crap I posses, that they'll also accept. Right?
Bingo... enter an ever-inflating, fiat currency, that's printed on paper and businesses are forced to accept at the end of a gun (in order to pay their taxes). Hell, in an apocalypse, you couldn't even wipe your ass with USD because you'd get too many paper cuts. There's tangible evidence of this too; when COVID hit the first commodity to fly off the shelves was TP 4 bunghole.
I'm almost surprised Charmin didn't become the new legal tender.
But again, Gersham's law precludes anything worthwhile from becoming money when there's something even worse that can be used instead. Meanwhile, I'm sitting on a ton of cash like an idiot because it's finally yielding something.
Anyway... until I hear a better explanation, I'm going to stick with this. The dire problem, as we seem to periodically experience, is when there's so much of this worthless currency that no one's willing to accept it anymore; hyper-inflation.
I don't think we're there yet, but ultimate demise is always difficult to predict.
In a nutshell, I suspect it has to do with Gersham's law (bad money drives out good). If I want to enter a trade, e.g. buy a car, and I'm looking for something to give to my counter party... I'm going to give them the most useless piece of crap I posses, that they'll also accept. Right?
Bingo... enter an ever-inflating, fiat currency, that's printed on paper and businesses are forced to accept at the end of a gun (in order to pay their taxes). Hell, in an apocalypse, you couldn't even wipe your ass with USD because you'd get too many paper cuts. There's tangible evidence of this too; when COVID hit the first commodity to fly off the shelves was TP 4 bunghole.
I'm almost surprised Charmin didn't become the new legal tender.
But again, Gersham's law precludes anything worthwhile from becoming money when there's something even worse that can be used instead. Meanwhile, I'm sitting on a ton of cash like an idiot because it's finally yielding something.
Anyway... until I hear a better explanation, I'm going to stick with this. The dire problem, as we seem to periodically experience, is when there's so much of this worthless currency that no one's willing to accept it anymore; hyper-inflation.
I don't think we're there yet, but ultimate demise is always difficult to predict.
"Government is the only institution that can take a valuable commodity like paper, and make it worthless by applying ink."
--- Ludwig von Mises
--- Ludwig von Mises
History lesson:
Before the Fed, there was a bank panic in every 7-9 years in the US.
If you want to know what it was like in the 1800s financial settings, it was exactly like today in the crypto world. Crypto fans reliving financial history in speed up time. Banks issuing their own currency then going bankrupt left and right.
For extra bonus: Name a non-shit country that has no central bank.
Sayonara...
Before the Fed, there was a bank panic in every 7-9 years in the US.
If you want to know what it was like in the 1800s financial settings, it was exactly like today in the crypto world. Crypto fans reliving financial history in speed up time. Banks issuing their own currency then going bankrupt left and right.
For extra bonus: Name a non-shit country that has no central bank.
Sayonara...
But you can't say what would have become of the U.S. if the Fed wasn't created and free banking adhered to. It could be that people adjusted and started to better vet the banks they use. Perhaps we'd have fewer loan sharks and fewer payday lenders today because financial literacy improved? Perhaps bank panics are the small price that's needed in order to better modulate global economic downturns often caused by the Fed.
You're presenting a "counterfactual" argument. What would be a more convincing argument, either for, or against central banking would be to look at two "non-shit" countries in the same time period where one had central banking and the other had free banking.
Obviously that's a difficult thing to do. Just defining "non-shit" may be a good place to start though, lol
I, personally, think that at the time there was some need for the Fed.
When the Fed was created there were no mobile phones, no credit cards, and no internet. The only way to get news and transfer funds were by physically sending paper.
However, it's now 2023, almost. And productivity gains have given us the rapid increase of technology and nearly instant information exchange. Free banking would be better in today's day and age since it would offer people more individual choice with less restriction.
Having a central bank these days, IMHO, is an anachronism and an albatross around people's necks. Maybe some of the FX traders around here agree?
Well, obviously this is all just my 2¢.
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Well, of course they do. Financial repression is a genie that's very hard to put back in the bottle.
Regarding examples of countries without central banks, I'll provide those when you can provide me with an example of a country that doesn't have periodic episodes of runaway inflation
See, what I mean? I'm not arguing that free banking is better for the state... I'm suggesting it's better for the individual. And therefore, a country of the self governed should seriously consider it as a more ethical, moral and likely better alternative.
%%Well, of course they do. Financial repression is a genie that's very hard to put back in the bottle.
Regarding examples of countries without central banks, I'll provide those when you can provide me with an example of a country that doesn't have periodic episodes of runaway inflation
See, what I mean? I'm not arguing that free banking is better for the state... I'm suggesting it's better for the individual. And therefore, a country of the self governed should seriously consider it as a more ethical, moral and likely better alternative.
FED is > better than every bank doing its own notes\LOL. Thats what caused part of the 1929-33+bear. But it was much worse, as you may know , with no FDIC.........................
One metals dealer makes a good case for metals also ; but i dont want to pay for a Loomis Armoured truck every time i buy real estate.
WHo says J Powell is corrupt?? He warned years ago congress cant keep spending out of control. S+P, US debt downgrade was obvious before it ever happened. Cant really blame the printer, when its an out of control punk overspending on his credit card.\
Good points.
Totally agree... it's not just monetary policy at work but fiscal policy too. I think the concern is what happens when the two collude without any check on each other. Do we stop being a free country? Do we make railroad workers go back to work on a chain gang?
Except both current and 1800s history disagree with that notion. But feel free to dream on.
You also have the the misbelief that with free banking there can be no inflation. That is simply not true as proven by local banks printing way too many notes.
A history and financial class would do you good.