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Federal Reserve: fact or conspiracy?
- Thread starter rselitetrader
- Start date
Quote from Martinghoul:
Well, I don't know... Are you making this conclusion on the sole basis of what the Fed is doing? Moreover, even if you only look at the Fed, how can you say that, while Volcker is still alive and kicking? In the UK, Mervyn King is just about the only good thing that's happened recently. How about the Bank of Spain, which is the only reason the Spanish banks are still around (due to the prohibition from holding any structured credit product)?
Well, groupthink has nothing to do with the Fed specifically. It has a tendency to infect any consensus-based system, including financial mkts, as we have seen.
Well, what if Britney Spears were an alien? How would we ever know?
What do you mean "member banks"? Any state-chartered bank can become a member of the Federal Reserve System (and most are) and get what you call "cheap financing". If you have a beef with the banks financing their profits at your expense, you have a beef with the entire US commercial banking system, rather than the Fed per se.
Hell, yeah, you'll get no disagreement from me there. However, if you look at what Sweden did, it wasn't just letting the banking system go.
Groupthink is when the FBI reports an epidemic of mortgage fraud in 2004 and almost everyone in the Fed ignores it.
Britney Spears can undergo the equivalent of a medical "audit". How about the Fed?
The member banks start the "profitability" race on the inside track of a track and field race where the participants are not staggered.
They then claim "profitability" (with help from a FASB change this time too) and extravagant rewards for their executives as though they had to compete for financing as though they were Caterpillar. This is a sham.
Firstly, pls feel free to suggest an alternative and let's see how it fares. Secondly, the basic idea of the Fed is not that it's the actual counterparty on all these Federal Reserve notes. In simplistic terms, the Central Bank is like an exchange where money trades. Everything follows out of that. Your other objections make very little sense or are factually incorrect.Quote from da-net:
I personally do not like the idea of a "Central Bank" as I have a few problems with their structure.
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There is no point to debating whether or not there is a conspiracy, the fact of the matter is there is no real reason to have a federal reserve bank except to serve the goals of the politicians. You cannot support a free market and the fed at the same time. As long as we have a federal reserve bank we do not have a free market.
Every federal reserve bank that has come before before us has failed. What I am more interested in are the consequences of having a federal reserve bank. The consequences are boom and bust cycles that destroy the middle class of every society and inflate the rich.
Do I think it's intentional? That is there is some world order at work here? I don't really care. We'll never know the answer to that. What we do have anecdotal evidence of are the consequences of central banking. And the results are terrible.
Free markets need to know the true value of money in order to survive. They need true price discovery. Without price discovery the markets will never function the way they are suppose to.
Every federal reserve bank that has come before before us has failed. What I am more interested in are the consequences of having a federal reserve bank. The consequences are boom and bust cycles that destroy the middle class of every society and inflate the rich.
Do I think it's intentional? That is there is some world order at work here? I don't really care. We'll never know the answer to that. What we do have anecdotal evidence of are the consequences of central banking. And the results are terrible.
Free markets need to know the true value of money in order to survive. They need true price discovery. Without price discovery the markets will never function the way they are suppose to.
Sure, I agree the Fed has been lax in dealing with the bubble. However, this can be said of everyone, including the idiot punters buying subprime RMBS til' they can't see straight. If you figure out how to deal with these issues, pls do let me know.Quote from MarketMasher:
Groupthink is when the FBI reports an epidemic of mortgage fraud in 2004 and almost everyone in the Fed ignores it.
The Fed has been audited, in a variety of creative ways. There's many a discussion I have had on the subject. If you're looking for government/private sector conspiracies, I just don't see how the Fed, with all the scrutiny/ire, is a sensible place to start.Britney Spears can undergo the equivalent of a medical "audit". How about the Fed?
But, as I mentioned, pretty much all US banks are "member banks" or can become one if they see fit. How can being a "member bank" be a competitive advantage in such a setup? Or are you comparing banks with normal corporates?The member banks start the "profitability" race on the inside track of a track and field race where the participants are not staggered.
They then claim "profitability" (with help from a FASB change this time too) and extravagant rewards for their executives as though they had to compete for financing as though they were Caterpillar. This is a sham.
Quote from Maverick74:
You cannot support a free market and the fed at the same time
Of course you can, the government is ALWAYS in control of what happens with the money supply. Many times during a gold standard they would jump out of it to print money(wars) or devalue to fool people with inflation. Its simply a matter of how you want the government to control the money supply, an independent central bank is a superior way in my view
Quote from Daal:
Of course you can, the government is ALWAYS in control of what happens with the money supply. Many times during a gold standard they would jump out of it to print money(wars) or devalue to fool people with inflation. Its simply a matter of how you want the government to control the money supply, an independent central bank is a superior way in my view
Sure, I have no problem with that. But that money supply has to be backed by something like it has been for hundreds of years. And they should not control and manipulate interest rates. Let the free market determine where interest rates should be. And no central bank is independent. In fact, making that argument actually puts you on the same side as the conspirators.
Quote from Martinghoul:
Sure, I agree the Fed has been lax in dealing with the bubble. However, this can be said of everyone, including the idiot punters buying subprime RMBS til' they can't see straight. If you figure out how to deal with these issues, pls do let me know.
The Fed has been audited, in a variety of creative ways. There's many a discussion I have had on the subject. If you're looking for government/private sector conspiracies, I just don't see how the Fed, with all the scrutiny/ire, is a sensible place to start.
But, as I mentioned, pretty much all US banks are "member banks" or can become one if they see fit. How can being a "member bank" be a competitive advantage in such a setup? Or are you comparing banks with normal corporates?
"Fed has been lax in dealing with the bubble". How about the dot.com bubble? How about the S&L? Do you think the Fed needs some external input into their groupthink mentality or that they have been functioning fine "as is"?
"The Fed has been audited, in a variety of creative ways."
Not sure what you mean by "creative" - maybe you can elaborate.
Your statement that the Fed is apolitical is stated as a tautology - it is because it is. Logically, your position would be to have an open and clear audit of the Fed to provide supporting data that it has not been influenced politically in any way. Is that correct?
"Or are you comparing banks with normal corporates? "
It is they who are scaling their compensation to normal corporates when they should not be.
Quote from Maverick74:
Sure, I have no problem with that. But that money supply has to be backed by something like it has been for hundreds of years. And they should not control and manipulate interest rates. Let the free market determine where interest rates should be. And no central bank is independent. In fact, making that argument actually puts you on the same side as the conspirators.
Fiat money is backed by the fact that you can use it to pay taxes and avoid going to jail. Furthermore as a long people trust the system, it works, yes people can lose confidence tomorrow and dollars would be worthless but that is a hindsight thinking, fact is, today people trust dollars in exchange for goods and that is worth something, therefore the money is back by a self-fulfilling trust
As far as independence goes, yes the Fed might not be fully independent but they are not fully nationalized either. Just go check the process for selecting regional Fed presidents. Furthermore the decisions are not made by people not directly in the executive, legislative or judiciary
Quote from Daal:
Fiat money is backed by the fact that you can use it to pay taxes and avoid going to jail. Furthermore as a long people trust the system, it works, yes people can lose confidence tomorrow and dollars would be worthless but that is a hindsight thinking, fact is, today people trust dollars in exchange for goods and that is worth something, therefore the money is back by a self-fulfilling trust
As far as independence goes, yes the Fed might not be fully independent but they are not fully nationalized either. Just go check the process for selecting regional Fed presidents. Furthermore the decisions are not made by people not directly in the executive, legislative or judiciary
I'm talking about restraint. New money has to have collateral behind it. Not for the sake of trust, but to impose limits on the velocity of supply.
We saw what happened in the mortgage crisis when debt is issued with nothing behind it. There is no accountability in the system at that point. If you are going to sell me free call options, I'm going to buy them with both hands and so would everyone on this thread. It's in our nature to exploit what's exploitable, that will never change.
If people want to make bad choices, that's fine. But the person who makes that bad choice has to pay the piper. That could be an individual, a corporation, a bank or even a government. A society cannot exist without consequences. Now those call options that are being sold are not risk free to the seller, only to the buyer. The only problem is the seller gets to defer the risk to the tax payer instead of absorbing the risk themselves. That cannot sustain itself over the long run. It's doomed to fail.