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A Simple Way to Kill the Fed

Would you?

  • Yes, we should tie treasury yields to the deficit as a % of GDP.

    Votes: 0 0.0%

  • Yes, we should tie treasury yields to the deficit as a % of gov't spending.

    Votes: 1 12.5%

  • No, we should let bankers keep running the Federal Reserve.

    Votes: 7 87.5%
  • Total voters
    8
Quite frankly, I don't know enough about how the current system works to know what the hell you're talking about.


But I do know that spending is too high if there is a budget deficit.
 
The Mark said:
Quite frankly, I don't know enough about how the current system works to know what the hell you're talking about.


But I do know that spending is too high if there is a budget deficit.
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The Fed is an excuse to manipulate interest rates for the sake of "balancing" inflation and unemployment.

The government doesn't want to pay much on its debt, so it prefers low interest rates.

In turn, low interest makes credit cheap, so unemployment goes down since consumers buy more and businesses invest more.

In turn, inflation goes up because of cheap credit, so paying off debt becomes cheaper for consumers.

With more liquidity comes more activity. Ergo, an increased need for regulation.

Ergo, an increased demand for government spending and intervention.

The only way I can see getting over this is if we tie treasury yields to the budget deficit as a % of GDP or government spending.

That way, the government can't expand recklessly, and overheat society into a self-fulfilling prophecy of needing more government.
 
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Daktoria said:
The Fed is an excuse to manipulate interest rates for the sake of "balancing" inflation and unemployment.

The government doesn't want to pay much on its debt, so it prefers low interest rates.

In turn, low interest makes credit cheap, so unemployment goes down since consumers buy more and businesses invest more.

In turn, inflation goes up because of cheap credit, so paying off debt becomes cheaper for consumers.

With more liquidity comes more activity. Ergo, an increased need for regulation.

Ergo, an increased demand for government spending and intervention.

The only way I can see getting over this is if we tie treasury yields to the budget deficit as a % of GDP or government spending.

That way, the government can't expand recklessly, and overheat society into a self-fulfilling prophecy of needing more government.
Click to expand...

So the FED is bad because it keeps our consumer spending based economy afloat? I'm not exactly a fan of debt-purchased consumer goods as an economic model, but its reality we have to live with for the moment. Your proposal would crash the economy, making any theoretical benefits not worth the cost.
 
rathi said:
So the FED is bad because it keeps our consumer spending based economy afloat? I'm not exactly a fan of debt-purchased consumer goods as an economic model, but its reality we have to live with for the moment. Your proposal would crash the economy, making any theoretical benefits not worth the cost.
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Can you describe the benefits of living in a service economy?

I feel like your argument is, "We shouldn't remove sugar from our diet because then, we'll get tired and cranky."
 
Here it is again. A simple rule to fix a complex problem vs. no solution at all. Yup, first simplify the description of problem, note that this doesn't simplify the problem nor does it need to be perfectly accurate, just sound right. It can help to have a solution in mind when your coming up with the description of problem. Next a simple solution is far easier to come up with. Check by using recursion, i.e. check the solution against the problem and adjust one or the other as necessary with the objective that fewer words is better. Believe the the result. Then you are done.
 
I do not trust the bankers, maybe this is wrong....but they, and all of us are human....so...I trust the people even less....

But, I do think that this system can be improved.

So, this is an idea, maybe not a good one....
 
The Mark said:
Quite frankly, I don't know enough about how the current system works to know what the hell you're talking about.


But I do know that spending is too high if there is a budget deficit.
Click to expand...
Good answer.
The deficit could be due to too little revenue as well as too much spending....may a 10-90 or a 50-50 deal......
 
There is no easy way to completely eliminate The Fed. We have to look at our economic policy as a whole along with our Constitution. First and foremost, the Constitution would forbid it under the 10th Amendment (you know that silly document our forefathers ratified to put power to the people). However, you can't simply eliminate it overnight. It would take a lot of time and effort to slowly faze it out.

We run under Keynesian economics which runs under the assumption that spending is better. That is the basic interpretation of it. Keynesian economists think that the private sector needs to be regulated by public spending, and a central bank rather then a free market. This system has led to more economic downfall then any other. Whenever you place too much power in the hands of government chaos ensues. The Fed is allowed to print money out of thin air and create credit rates. They have control over the unemployment stats which are also under the artificially created numbers under The Fed. The funny thing about the Federal Reserve is that it is no more "federal" then FedEx. There is no accountability, or system of audit. We just blindly trust these groups of bankers to take care of us.

Austrian economics would be better which states that economies run better on free markets with little intrusion from government. Instead of flawed stats they derive economic theory from principles of human action. It is a more logical and sound way to run an economy then all this government interference.

Once we change the way we run the economy and focus more on a free market system, then The Fed becomes irrelevant.
 
Daktoria said:
Can you describe the benefits of living in a service economy?

I feel like your argument is, "We shouldn't remove sugar from our diet because then, we'll get tired and cranky."
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The pain and suffering experienced by the American people from a major economic crash is far beyond getting tired and cranky. A better analogy would be an alcoholic with withdrawal so severe that it can kill him. The FED is an absolute requirement to avoid disaster given current circumstances. If you want to get rid of the FED, you first need to alter the economic paradigm so it no longer becomes necessary. Saying "I don't like the FED and we should get rid of rid regardless of the consequences" is childish and has no place in sensible economic policy.
 
The anti-fed guys would prefer Congress set the amount of money per year that the treasury prints.

Oh good plan. So when Democrats are charge, the Democrats print a couple extra trillion dollars to fund their people. When Republicans are in charge, the Republicans print a couple extra trillion dollars to support the rich as they cut their taxes. What an awesome plan.

AreteCourage said:
We run under Keynesian economics .....Austrian economics would be better
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The Great Kenyan vs. Australian Debate: more like a couple monkeys flinging poo at each other.
 
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rathi said:
If you want to get rid of the FED, you first need to alter the economic paradigm so it no longer becomes necessary.
Click to expand...

You don't see this step doing that?

When the interest rate is tied to the budget deficit, that means the government chooses how much it's going to pay on interest in accordance with how far expenses are greater than revenues.

The economic paradigm shift would be towards fiscal responsibility where people pay their bills.
 
Matt Foley said:
The anti-fed guys would prefer Congress set the amount of money per year that the treasury prints.

Oh good plan. So when Democrats are charge, the Democrats print a couple extra trillion dollars to fund their people. When Republicans are in charge, the Republicans print a couple extra trillion dollars to support the rich as they cut their taxes. What an awesome plan.
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Not true for me. I want government out of it, and the free market to set the standards.
 
AreteCourage said:
There is no easy way to completely eliminate The Fed. We have to look at our economic policy as a whole along with our Constitution. First and foremost, the Constitution would forbid it under the 10th Amendment (you know that silly document our forefathers ratified to put power to the people). However, you can't simply eliminate it overnight. It would take a lot of time and effort to slowly faze it out.

We run under Keynesian economics which runs under the assumption that spending is better. That is the basic interpretation of it. Keynesian economists think that the private sector needs to be regulated by public spending, and a central bank rather then a free market. This system has led to more economic downfall then any other. Whenever you place too much power in the hands of government chaos ensues. The Fed is allowed to print money out of thin air and create credit rates. They have control over the unemployment stats which are also under the artificially created numbers under The Fed. The funny thing about the Federal Reserve is that it is no more "federal" then FedEx. There is no accountability, or system of audit. We just blindly trust these groups of bankers to take care of us.

Austrian economics would be better which states that economies run better on free markets with little intrusion from government. Instead of flawed stats they derive economic theory from principles of human action. It is a more logical and sound way to run an economy then all this government interference.

Once we change the way we run the economy and focus more on a free market system, then The Fed becomes irrelevant.
Click to expand...

There's a reason Austrian theory falls flat.

What libertarians fail to realize is society doesn't care. The value of the Federal Reserve is that it provides a sophisticated institution which people respect. Without that sophistication, nobody would see a reason to respect creditors. They would simply beat creditors up, take their money, and run. If you're an innocent property owner, and you get violated, the courts would only care to honor your claim if they liked you.

The reason Austrians hate the Fed is because it allows some sophisticates to have power while abandoning others.

My proposition eliminates this. When treasuries are tied to the budget deficit, that means legislators get elected per economic expertise. We don't end up with a legislature with elitist monetary policy outsourcing. We end up with a legislature with populist monetary policy insourcing. Candidates can't run on reckless spending because the tie holds them responsible, so the only people elected are those who actually understand how to handle money.
 
Daktoria said:
There's a reason Austrian theory falls flat.

What libertarians fail to realize is society doesn't care. The value of the Federal Reserve is that it provides a sophisticated institution which people respect. Without that sophistication, nobody would see a reason to respect creditors. They would simply beat creditors up, take their money, and run. If you're an innocent property owner, and you get violated, the courts would only care to honor your claim if they liked you.

The reason Austrians hate the Fed is because it allows some sophisticates to have power while abandoning others.

My proposition eliminates this. When treasuries are tied to the budget deficit, that means legislators get elected per economic expertise. We don't end up with a legislature with elitist monetary policy outsourcing. We end up with a legislature with populist monetary policy insourcing. Candidates can't run on reckless spending because the tie holds them responsible, so the only people elected are those who actually understand how to handle money.
Click to expand...

You are assuming people respect The Fed. People don't trust big bankers, so why would they trust the ones in the Federal Reserve? You think we couldn't work with a Federal Reserve, but we did just fine without it. Our government can uphold contract laws, bankruptcy laws, and the rights of individual liberty and property.

Your proposition adds to an already huge bureaucracy. So let me get this right....you don't trust the big bankers but you trust the politicians to run our monetary system? I hardly think that adding more to our government will solve this issue. You put way too much trust in these bureaucrats. Our federal government should not be involved so heavily in our economy and monetary system.

Austrians hate the Fed because it works under a failed Keynesian system.
 
A free trade system in today's world is unstable. Instability in a system requires a negative feedback loop. When the economy is going great guns you tax it more and put the money in the 'bank'. This slows down the growth a bit, negative feedback, but the system is ready for a slow down, e.g. housing bubble doesn't get as bad. Then when the free market collapses some it not starting from such a over build. Then the government should decrease taxes but spend in such things as infrastructure. This is negative feedback also, note that it moves the economy in the opposite direction it tends to go. All stable systems have negative feedback.
The statement that "We run under Keynesian economics which runs under the assumption that spending is better." is not correct. Keynesian economics is a negative feedback process, a stabilizing method. There is a time delay that should be about a year or two.
(I'll be off for a while.)
 
AreteCourage said:
You are assuming people respect The Fed. People don't trust big bankers, so why would they trust the ones in the Federal Reserve? You think we couldn't work with a Federal Reserve, but we did just fine without it. Our government can uphold contract laws, bankruptcy laws, and the rights of individual liberty and property.
Click to expand...

Not true:

http://en.wikipedia.org/wiki/Political_machine#Political_machines_in_the_United_States

Your proposition adds to an already huge bureaucracy. So let me get this right....you don't trust the big bankers but you trust the politicians to run our monetary system? I hardly think that adding more to our government will solve this issue. You put way too much trust in these bureaucrats. Our federal government should not be involved so heavily in our economy and monetary system.
Click to expand...

I'm not sure why you believe I trust politicians. The whole purpose of the tie is so we don't trust politicians. I'm not suggesting that Congress can arbitrarily set interest rates. It's held by the organic constraint of the budget deficit.

Austrians hate the Fed because it works under a failed Keynesian system.
Click to expand...

You know the Fed was established before Keynes came around, right?
 
AreteCourage said:
Not true for me. I want government out of it, and the free market to set the standards.
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Section 8

The Congress shall have Power To

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
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I thought Libertarians were all Constitutionaly'ish.

You get rid of the FED, and what I said is exactly what will happen.
 
AreteCourage said:
Not true for me. I want government out of it, and the free market to set the standards.
Click to expand...

I have difficulty reconciling the U. S. Treasury Department's Plunge Protection Team and "Free Markets."
 
The way I see the Fed is that it is required to give confidence to the paper it distributes and that would be Federal Reserve Notes. Ergo, it often states its' confidence in the status quo, whatever that mey be, just like any confidence man hawking his wares. It's like a big balloon full of confidence. As you get more and larger holes in the balloon, just install bigger pumps to maintain the status quo of inflation, and work around the holes. Now, if you or I or Three fingers Pete, the renowned artist and amatuer printer, try this, we are arrested for counterfeiting, fraud, etc. One man's bad paper should be just as good as another's, don't you think? That is the reality. It's about debt, not real money. A bad joke that will end badly. However, like the recent big Banking crisis of 2008 and the GWShiiteForBrains Great Depression, noone will be held accountable, so the joke is on us, the USA.
 
The real purpose of the FED is to prevent exactly what I just said. It's given 2 contradictory missions:

1) Prevent inflation
2) Maximum employment

The FED came about when gold was replaced by paper money, and the last thing you want with paper money is Congress determining every week how much is printed and how much of that new money is simply used to pay off debt.

The last time paper money wasn't valued in Gold or Silver (without the FED) was Continental Currency, which was printed into uselessness.

And no the solution isn't to back money in Gold or Silver like the Ronulans claim, this massive trade deficit will simply mean giving China all of the Gold in Fort Knox in less than 6 months. What exactly would that accomplish other than giving China all the Gold in Fort Knox in less than 6 months and then backing it with nothing again.

And no the solution isn't to back money in Gold in Silver, sorta'like like the Ronulans claim, then if you couldn't trade the money for gold and silver than it's no different than not backing it with gold and silver, you simply changed a few words around.
 
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Daktoria said:
Would you support tying treasuries to the budget deficit as a percent of government spending or GDP?

For example, this year, the budget deficit is 8.51% of GDP. Therefore, treasury par value would sell at 8.51%

Find out more here:

Government Spending Details: Federal State Local for 2012 - Charts
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We don't have a budget deficit because of the Federal Reserve, though.

We have a budget deficit because we can't get tax reform passed.

And the reason why we can't get tax reform passed is because the corporate lobbyists who pay campaign contributions to our Representatives and our Senators won't let them.

So I don't see why we should blame the Fed for what's Congress' fault.
 
The FED came about when gold was replaced by paper money, and the last thing you want with paper money is Congress determining every week how much is printed and how much of that new money is simply used to pay off debt.
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Actually the Fed was created after a banking crises in 1917 (I believe) and was created to be the lender of last resort. The previous banking crises depended on JP Morgan (the guy) and other investors to bail out a failed NY bank to stave off a bank run.
 
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