Federal Reserve: fact or conspiracy?

[Maverick74]

OK, let me clear something up. I don't think I, nor do I think anyone on this thread believes the Fed intentionally creates booms and busts. It's part of the law of unintended consequences. In fact, I would argue the opposite. The Fed has every incentive in the world to do everything in their power to avoid them.

The fact that a boom or bust happens is usually indication of their failure or at the very least, proof that they serve no useful purpose. Believe me, no one at the Fed wants to see bubbles no more then a thief wants to leave a DNA print behind at the scene of a crime.

 

[Hello]

I met Gerald Bouey, stood side by side with him, and my dad told me when he was raising rates in the late 70's/early 80's to 20% he knew damn well he was driving people out of their houses, and the guy was nearly having a breakdown because he knew exactly what his policies were causing but they were necessary for the economy, none of these guys want to cause pain to the every day guy, it does not benefit them personally from a monetary standpoint, they play a thankless job, and people want to bag on them as though central bankers are running some sort of crooked conspiracy, it could definately be argued though that Greenspan wanted no part of proper control over the economy, and maybe he was a self serving asshole, and he wanted to be labeled as the good guy, bernanke isnt like that though, and no one before Greenspan ever was either.

 

[Hello]

Quote from Maverick74:

OK, let me clear something up. I don't think I, nor do I think anyone on this thread believes the Fed intentionally creates booms and busts.

Look at the link from the OP......

 

[Hello]

Quote from Maverick74:

OK, let me clear something up. I don't think I, nor do I think anyone on this thread believes the Fed intentionally creates booms and busts. It's part of the law of unintended consequences. In fact, I would argue the opposite. The Fed has every incentive in the world to do everything in their power to avoid them.

The fact that a boom or bust happens is usually indication of their failure or at the very least, proof that they serve no useful purpose. Believe me, no one at the Fed wants to see bubbles no more then a thief wants to leave a DNA print behind at the scene of a crime.

What do you think the current interest rates would be if central banks did not exist?

If ordinary banks could just charge what they wanted for money, interest rates would be well over 10% right now, you know it as well as i do.

 

[dtan1e]

Quote from Hello:

I met Gerald Bouey, stood side by side with him, and my dad told me when he was raising rates in the late 70's/early 80's to 20% he knew damn well he was driving people out of their houses, and the guy was nearly having a breakdown because he knew exactly what his policies were causing but they were necessary for the economy, none of these guys want to cause pain to the every day guy, it does not benefit them personally from a monetary standpoint, they play a thankless job, and people want to bag on them as though central bankers are running some sort of crooked conspiracy, it could definately be argued though that Greenspan wanted no part of proper control over the economy, and maybe he was a self serving asshole, and he wanted to be labeled as the good guy, bernanke isnt like that though, and no one before Greenspan ever was either.

in any organizations there are those that truly believe they are doing good or could even be true a long time ago, but nowadays, just based on the actions of the fed, it does look like a grand calculated scheme to siphon the country's wealth to certain concentrated groups, boom or bust are used as excuses to further their causes

 

[Hello]

I agree that todays fed is a disaster based on what greenspan and bernankie did, however could you imagine how high morgtage rates would currently be if the fed wasnt currently creating artificially low rates?

We would be well over 10% as the norm for mortgages...... What do you think that would do to the economy.....the Fed serves its purpose because it counteracts the natural economic response in the time of need, and naturally counteracts the economy in the time of need......

Quote from dtan1e:

in any organizations there are those that truly believe they are doing good or could even be true a long time ago, but nowadays, just based on the actions of the fed, it does look like a grand calculated scheme to siphon the country's wealth to certain concentrated groups, boom or bust are used as excuses to further their causes

 

[Maverick74]

Quote from Hello:

What do you think the current interest rates would be if central banks did not exist?

If ordinary banks could just charge what they wanted for money, interest rates would be well over 10% right now, you know it as well as i do.

And that would be bad why? Look, the interest rate market is the most competitive market in the world. Banks could charge what they want, but if they price too high, the market will come underneath them. Personally I think 10% rates would a miracle cure for everything that is wrong with the world right now. But that is just one man's opinion.

 

[Maverick74]

Quote from Hello:

IMHO inflation is a highly unlikely scenario given the amount of funny money (credit money) which has come out of the economy, thus i think 10% would be crippling.

Had we not already played the interest rate game for years it may be a different story.

I'm not saying rates should be 10% because of inflation, I'm saying 10% rates would reflect the actual risk that's in the marketplace without an implicit guarantee from the government to bail out bad debt.

People are walking away from their mortgages leaving the keys in the door. They are doing the same with their cars and their credit card debt. And the government is backstopping all this debt. The only reason credit is being offered to anyone is because the government will protect against default. If the lender had to actually absorb the default risk, he sure as hell would not be lending money at the rates they are now.

Yes, I agree with you that 10% rates would be crippling. And crippling is exactly what we need. There needs to be a cultural change in this country and it ain't going to happen by lending money at zero interest.

 

[Hello]

Quote from Maverick74:

And that would be bad why? Look, the interest rate market is the most competitive market in the world. Banks could charge what they want, but if they price too high, the market will come underneath them. Personally I think 10% rates would a miracle cure for everything that is wrong with the world right now. But that is just one man's opinion.

This is the only time out of anything which involves outsider involvement that i support intervention against free market principles, interest rates have such a great impact that i support someone controlling them, if the free market interest rates were left unfettered, they would serve the exact opposite purpose every single time, struggling economies would always suffer longer due to 10% plus interest rates, and the reverse scenario of 1% interest rates would only further inflate bubbles....



Oh wait that already happened.....

 

[Maverick74]

Quote from Hello:

This is the only time out of anything which involves outsider involvement that i support intervention against free market principles, interest rates have such a great impact that i support someone controlling them, if the free market interest rates were left unfettered, they would serve the exact opposite purpose every single time, struggling economies would always suffer longer due to 10% plus interest rates......

You can't get a little bit pregnant.

To Quote Bush "I've abandoned free-market principles to save the free-market system." One of the worst quotes of all time.

I think the problem we have here is point of view. I see a suffering economy as good, you see it as bad. A suffering economy is a symptom to a problem. It tells us we need to fix something. The same way that when your body gets sick, your body sends you signals that something is wrong. If we never had those symptoms, we would die. Because we would never know there was anything wrong with us.

The idea is not to give the economy pain killers so we don't have to feel the pain. The idea is to feel the pain so we don't make the same mistakes again in the future. You want to treat the symptoms. I want to treat the disease.