On Mar 29, 1:59 pm, "Canuck57"
unixhome.net> wrote:>> On Mar 29, 8:49 am, "Econotron"
hotmail.com> wrote:>>> "anon"
privacy.net> wrote in
>>> messagenews:1PhHj.50$ta2.10@trndny05...>
>>>> "Econotron"
hotmail.com> wrote in message
>>>>news:SXbHj.25$oE1.13@trndny09...>
>>>>> Fed knows that there would be no rerun of 1929, for the reasons
>>>>> explained
>>>>> here and elsewhere.
>
>>>> The problem is the current Fed chairman. He has spent his life studying
>>>> how to prevent the 1930s. And he wants to use his solution regardless
>>>> whether the problem is similar. He sees deflation behind every corner.
>>>> He
>>>> has a solution (helicopters) looking for a problem.
>
>>>> The way the paper based money works, a government can always engineer
>>>> enough inflation by just giving away money. He said as much.
>
>>>> The natural cycle in a fiat currency based system and a dishonest
>>>> financial sector in cahoots with a pliant govt (the path of least
>>>> resistance) is inflation and more inflation (ie, stagflation). In real
>>>> terms it just means devaluation of honesty, and declining living
>>>> standards
>>>> for the people who trusted the system.
>
>>>> The real casualty is the credibility of the US and its currency. The US
>>>> always called for "fiscal and monetary discipline" when the crises hit
>>>> in
>>>> Asia and Latin America. Obviously the medicine was for others, not for
>>>> the
>>>> US. This means the next time the US tries this trick to buy super cheap
>>>> assets in third world countries, it will be laughed out of the room.
>>>> Putin, Chavez etc have understood this well.
>
>>>> The Fed with infinite buying power can always bail out whoever it wants
>>>> and the bailed out will always claim "the action was historic and
>>>> brilliant". The virtue of the Central Bank is maintaining honesty and
>>>> fair
>>>> play in the system, not in post-bubble cleanups - these actions just
>>>> imply
>>>> ever quicker bubbles because the cost of the bubbles is borne by the
>>>> honest people. A free rider problem.
>
>>>> It is easy to become a hero following a path of least resistance and
>>>> spoiling the (speculator) children with other people's money. Again,
>>>> speculators close to the Fed will win, working honest people will lose.
>>>> It
>>>> is not enough to punish the shareholders of the investment banks. By
>>>> removing the counterparty risk the Fed has only made sure that more and
>>>> more contracts will be created where the profit will go to the
>>>> investment
>>>> banks and losses to the people. As long as they can make a big enough
>>>> bet
>>>> to be a danger to the system, they have won either way.
>
>>>> The way out is to strip the Fed of its powers. Unfortunately currently
>>>> it
>>>> seems the Fed will end up with more powers. The Fed caused this
>>>> problem,
>>>> and they are giving more drugs to the peddler.
>
>>> Of course. I only hope there are enough reasonable people in some
>>> positions
>>> of power, who would call the current Fed activity for what it is - a
>>> large
>>> scale counterfeit operation to bail out financial speculators - to put a
>>> break on its activity.
>
>>>> 1. The problem of interest rates:
>
>>>> - can be set by a secret ballot of a few hundred randomly chosen
>>>> economists who work in taxpayer funded universities and govt positions
>>>> and
>>>> competent, concerned citizens who have passed a simple test on
>>>> macroeconomics. Anyone who reveals his vote, or of the deliberations of
>>>> the conference will be disqualified from future selection.
>
>>>> - This way the problem of vanity, nexus, "back scratching",
>>>> "retirement
>>>> lecture circuit" between Fed officials and financial sector can be
>>>> avoided.
>
>>>> 2. Capital and reserve requirements:
>
>>>> - can be set by the Congress on the advice of OCC and FDIC
>
>>>> 3. Oversight:
>
>>>> - OCC and FDIC
>
>>>> 4. Lender of last resort:
>
>>>> - Treasury
>
>>>> 5. Dense lectures:
>
>>>> - Can be left to the Fed chairman.
>
>>> I may offer an alternative here.
>>> 1. The market sets interest rate.
>>> 2. No reserve requirements. Deposit insurance is voluntary.
>>> 3. No oversight (well, may be very limited).
>>> 4. No lender of last resort (bankruptcy, as Andy pointed out).
>>> 5. Fed chairman can lecture, but should be required to wear an orange
>>> suit.
>>> e
>
>> yea that ought to work well. have you studied the era from 1870-1895?
>> one long depression, with lots of instability, and no investment from
>> abroad. we were considered to risky, a third world no rule of law.
>
> Back then, the banks produced their own notes. Your point being?
>
> If your idea that banks printing money is a bad idea, I hear you.
part of the point, correct
