END THE FED! Please Understand What Rangel Is Saying...

[Young Jeffersonian Republican]

"Don’t ask me where we’re going to find the money. I’m going to get it where Paulson found it”. ~ Charles Rangel

There have been some on this site suggesting that ending the Fed wouldn't fix any problem, but they still don't realize that the Fed is the root of the outlandish spending in Washington. The Fed is handing out free drugs to drug addicts, and you should not be surprised when the addicts abuse those free drugs to the detriment of themselves and others. Stop the drug dealer. End the Fed.

[Whitehorse (Robin Ray)]

Charlie Rangel is one of the gifts who keep on giving... His words will make great advertisements for 2010 candidates if they will use them.

[Stonewall]

I have been buying gold since 2003. I am the only person on earth to do so and basically break even.

Actually I think that the currency crisis in the 70s stemmed from foreigners. US Citizens were not allowed to buy gold from the Treasury, so the world, would send us dollars and take gold. The French for example would export wine and cheese and import Gold @ $35/.oz which was well below the world market price. I don't think it was a true Gold Standard. It was a deal where foreign banks could exchange dollars for gold at a fixed rate. So the backing of the dollar with gold is what caused the crisis in the 70s. My guess is that they were printing money all along as well.

Much of the problem with the economy in the 20s was as it is today. Low interest rates induce future consumption to occur today, which creates imaginary wealth. So people are not only leveraging income, but income that is really derived from future consumption that was pushed forward. As you go forward you need to steal greater and greater amount of demand from the future to keep the economy growing in the present. I am not sure that the Fed did this. Banks and brokerages gave out leverage without intervention from the Fed. If you had a brokerage account you could leverage it 10 to 1. That is an equation that will explode just as it did in 2000. I don't know that the Fed caused the Great Depression as much as they took a bad situation and made it worse.

[Young Jeffersonian Republican]

And I can't forget to mention that what turned the recession of 1929 into a full fledged depression was the interventionist policies of both Hoover and FDR...just like what Bush and Obama are doing now which will eventually turn this recession into another massive depression.

Please stock up on gold and silver while its still not too late.........PLEASE!

[Young Jeffersonian Republican]

Stonewall, I appreciate the intelligent debate you put forth. It is good to know that you have a solid understanding of the economics, and you have not yet been introduced to the Austrian School of Economics. If you are an economics buff like myself, you will find this material quite fascinating. It is significantly more reality based than that of the Keynesian view of the business cycle where as it is so accurate as to it not being able to explain stagflation in the 70's and did not predict our current "great recession". Aren't you glad that this is what is primarily being taught in college level economics courses lol?

Keep in mind, that Ludwig von Mises, a prominent Austrian theorist who advocated for a true gold standard, was one of the few people on earth who predicted the Great Depression. How did he know? Also keep in mind that the Austrians accurately predicted this "great recession" while the Keynesians again got blindsided by one of the biggest financial meltdowns in the history of mankind. How were they so right, while everyone else including the Keynesian were so wrong? Please read further....

Anyway, you bring up the point that we were under a gold standard during the Great Depression and during the 60's and 70's. Yes we were. Unfortunately, with the Federal Reserve acting as the all-knowing central planner they had the ability to set interest rates (which they still do today). Central planners have no way of knowing what the interest rates ought to be (which in a truly capitalistic society the market would set the rates), and they usually set them incorrectly. When the Fed sets the interests rates too low, it stimulates an increase of borrowing which is then amplified by fractional reserve banking where debt is pyramided upon debt. This excessive increase in credit creates a boom, and a greater number of investment dollars are thrown at diminshing investment opportunities. A bust is sure to follow becasue under true free market conditions resources would not have been allocated to those ventures which the market deemed excessively risky. Whole books have been written on this subject do not take my interpretation as the "final word". I strongly urge you to read "America's Great Depression" by Murray Rothbard to really grasp how the Austrians accurately predicted the Great Depression.

I will quickly go into why in teh 60's and 70's we experienced the massive problems while we still were on the Gold standard. It really is a simple explanation. At that time one could turn in their federal reserve notes in exchange for physical gold (How cool!). During that period, once again the brilliant Fed set interest rates below what the market would have set them, and a boom was created thus the country got too leveraged up due to the excess credit in tandem with our fractional reserve banking system. With that occurance, intelligent countries and people KNEW we were too leveraged up and did not have all the gold to back up all of the federal reserve notes circulating in the economy. People were turning in their dollars for gold, and the government knew that if everyone turned in their notes they did not have the gold to back up the dollars. Essentially, the government defaulted and broke their contract with all of those individuals holding dollars and NIXON (1971)terminated the ability to turn in dollars for gold and thus our fiat monetary system was born. The problem resides in the Fed incorretly setting interest rates along with the practice of fractional reserve banking and its excessive reserve ratio requirements.

I hope my relatively simple synopsis' have not been written in vain. There is no way to expect anyone to fully make the case I have been making in only a few paragraphs, and I strongly encourage you to read the following works for your own peace of mind in order to fully comprehend the Austrian view of the business cycle.

America's Great Depression and The Case Against the Fed by Murray Rothbard

GOOD LUCK! :)

[Joe Simpson]

WHat do you mean Board Founding Fathers Set up? The Founders had a fierce debate over wether to have a Central Bank. We didnt have a Fed then. Jackson killed the Bank of the US and the fed did not appear till 1913. Stonewall; clearly some sort of market based interest pricing is necesarry to secure correct interest rates. Like you said before the real losers are the Americans who are trying to save money. Contrary to what the Bush Adminstration and the Obama Admin tells us. Savings is actually excellent for the economy and its the only way we are going to be able to get out of this mess if we can save and produce. Not Borrow and spend.

[Jim Rock]

we know it gets audited on a daily basis unless folks refused to read the schedual I post-audit schedual

llooks like the fed may just please the Left Wing after all and become controlled by other than the board our founding fathers set up---its going to the IMF so we will no longer have our soverignty with our Fed reserve/central bank being audited and controlled by foriegn nations. Wow, maybe the conspiracies will finally come true

[Stonewall]

"Stonewall: You have clearly said that the fed is a system of failures, but you dont support auditing it nor do you support aboloshing it. "

Joe, fair critique. I would say that we need to define a mission for it. Dropping dollar bills from helicopters isn't a sane mission, and that is what they have been doing for 20 years. So I can tell you that I am in between the extremes of closing it and putting some regulators on top of it.

Look at their mission. They are a failed regulator. So take away regulation. Do you need an audit to figure out that a quasi-private institution shouldn't have regulator powers and money printing powers together? I would look at what they have done well, and shape a job around that.

The Republicans don't want to touch this because they would have to admit that the last 20 years was a mistake. I sense that most of the people on the Hill believe that if they tell us that it isn't a problem long enough we will believe them. If there is a problem, it will not reflect well on GW and the Republican controlled Congress's. Keep in mind that it was a Republican administration who proposed all of this silliness. Second,if there is a problem they would have to fix it. Much better to blame it on past mistakes, like sub-prime, and say we have a solution which painful is for the good of the country. Blah, blah, blah....

Get rid of the Fed? We can't even get rid of its incompetent leaders. Geither and Bernanke were either asleep or wilfully stupid. We promote one and re-appoint the other. And you think we are going to close the Fed?

[Joe Simpson]

The economic sucess of Reagan in a large part can be contributed to Paul Volckers Monetary policies. There is no doubt about that. Stonewall: You have clearly said that the fed is a system of failures, but you dont support auditing it nor do you support aboloshing it. Clearly the Feds open spicket policy leads to outlandish spending by Washington. Its true that in the past the Fed, e.g your comment about Volcker did put a stop to the spending, but in general the Fed chairman is always looking for a reapointment so they open up the monetary faucet to create some short term growth so they can reapointed. IF you support nither abolishing it nor auditing it what would be your recommended solution to our current monetary chaos. Clearly interest rates being determined by the Fed is generally disasturous. Bernanke currently has interest rates at 0. This is insanity and will surely lead to further financial chaos down the road. I don't know if I necesarrily support the GOld Standard per se, but definitely an alteration to our current monetary policy. What do you people say? Aside from Ron Pauls focus on this issue. I do know Paul Ryan of Wisconsin has introduced legislation that aims at dealing with the issue of interest rates. While Ryan who generally is very pro free mart did vote for the bail uts which blew my mind seeing as it never seemed like somthing he would ever believe in. he has had some insight on the problems with our Monetary policy. It is clear the Democrats arent offering any solutions to these problems. This is an issue the Republicans could take up as their own in an effort to create a "bigger tent".

[Stonewall]

Oppps. Typo. You wouldn't get an argument from me if you said that Ben Bernanke and Alan Greenspan were incompetent boobs.

[Stonewall]

As I understand the gold standard, it didn't stop the Great Depression, and it didn't stop politicians from destroying the currency in the 60s and 70s. In fact, as I recall having currency convertible to gold led to massive redemptions by foreign governments which eventually forced us to let the currency float. So history doesn't suggest that a gold standard will stop crisises or stop politicians from overspending.

If you statement "Fed is the root of the outlandish spending in Washington" were true, how do you explain Paul Volcker who resisted the urge to print money, and in fact raised interest rates to fight inflation. So at some point the fed has been the breaks on spending rather than the grease. I suspect that you would be in a small minority of you say that Volcker didn't do a good job. If your point is that Ben Bernanke and Alan Greenspan were incompetent boobs, you would get an argument from me. In that case the problem isn't the Fed but rather who is appointed to run it.

Can you tell me another world economy that is running on the gold standard that depends upon credit as much as our society. If you that the gold standard will curb our credit, then your fix is a cultural one not a monetary one.