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Old 11-04-2012, 08:42 PM   #11
muz
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Default Re: Do you think the Federal Reserve helps or hurts the American economy?

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Originally Posted by Tech Explorer View Post
The way I see it, local and regional banks would be more responsive to their respective economies than the Fed ever could be so I think the country would be better off not having these banks not tethered to the Fed. And isn't it true we didn't have depressions before the Fed existed?
So you would advocate doing away with the fed in order to have interest rates set locally . I agree perhaps in a country as big as the USA the fed might preside over an area way to large to be doing good for every economy in every state ,however the alternative is allowing interstate economic competition which already exists but if you allowed the interest rate to be amended at state level there is a real risk one state could try and ruin another and you would end up with slum towns where only the very poorest lived because a favorable interest rate attracts everyone to another state or you would end up with everyone depositing all of their money in bank accounts in one state because of a favorable interest rate there . however the idea of an independent central bank setting interest rates is something i couldn't disagree with .

The problem with trying to historically analyses the cycle of depressions before the fed is that prior to the fed the economy was not the same ,in the 19th century you had the industrial revolutions which established the industrial economy of which we pretty much now have a modern version of worldwide . however now we manufacture less and rely on a service based economy a lot more , some people speculate that is where we went wrong . prior to that in the 17th and 18th century you had colonial farming economies . dont forget up until the 1800's slavery was used , whilst completely inhumane slavery makes sound economic sense because you are getting labour for free and so whilst now wage costs are an economic factor back then wage costs wouldn't have even been a consideration whilst you paid for the slaves this was nothing compared to what wage costs would have been .

We have a central bank in the UK as well which sets interest rates . I have long been a proponent of this type of system rather than letting interest rates be set locally or letting the government have control over interest rates because it is conducive to stability . The risk of having some ulterior motive played out when setting interest rates is very prevalent if you let the government set them for example a leader who knows an election is approaching , they create economic conditions that make them look good in the short term but aren't actually good in the long run . Whereas having central banks where you have economic experts making the decision who are not at the whim of the electorate and dont have a fixed number of terms etc is in my view the key to sound economic decision making . The only thing these economists who work at the central banks have to loose is their reputation which would make them act to the very best of their abilities .
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Old 11-04-2012, 10:53 PM   #12
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Default Re: Do you think the Federal Reserve helps or hurts the American economy?

I'm not sure how much I can say without disappearing into one of Cready's black bags... so I'll side with safety.

1. The "Fed" is not "Fed" at all. It is privately owned. A private entity prints money and then sells it to the government.
2. The money is worth nothing. There is no gold standard, it represents nothing.

“If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless”
Thomas Jefferson
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Old 11-05-2012, 04:17 AM   #13
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Default Re: Do you think the Federal Reserve helps or hurts the American economy?

I think the US Federal reserve like our Reserve Bank helps the economy when needed, it helps to regulate your interest rates and is independent of Government control.
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Old 11-05-2012, 07:03 AM   #14
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Default Re: Do you think the Federal Reserve helps or hurts the American economy?

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Originally Posted by muz View Post
So you would advocate doing away with the fed in order to have interest rates set locally . I agree perhaps in a country as big as the USA the fed might preside over an area way to large to be doing good for every economy in every state ,however the alternative is allowing interstate economic competition which already exists but if you allowed the interest rate to be amended at state level there is a real risk one state could try and ruin another and you would end up with slum towns where only the very poorest lived because a favorable interest rate attracts everyone to another state or you would end up with everyone depositing all of their money in bank accounts in one state because of a favorable interest rate there . however the idea of an independent central bank setting interest rates is something i couldn't disagree with .

The problem with trying to historically analyses the cycle of depressions before the fed is that prior to the fed the economy was not the same ,in the 19th century you had the industrial revolutions which established the industrial economy of which we pretty much now have a modern version of worldwide . however now we manufacture less and rely on a service based economy a lot more , some people speculate that is where we went wrong . prior to that in the 17th and 18th century you had colonial farming economies . dont forget up until the 1800's slavery was used , whilst completely inhumane slavery makes sound economic sense because you are getting labour for free and so whilst now wage costs are an economic factor back then wage costs wouldn't have even been a consideration whilst you paid for the slaves this was nothing compared to what wage costs would have been .

We have a central bank in the UK as well which sets interest rates . I have long been a proponent of this type of system rather than letting interest rates be set locally or letting the government have control over interest rates because it is conducive to stability . The risk of having some ulterior motive played out when setting interest rates is very prevalent if you let the government set them for example a leader who knows an election is approaching , they create economic conditions that make them look good in the short term but aren't actually good in the long run . Whereas having central banks where you have economic experts making the decision who are not at the whim of the electorate and dont have a fixed number of terms etc is in my view the key to sound economic dcision making . The only thing these economists who work at the central banks have to loose is their reputation which would make them act to the very best of their abilities .
Don't know if you're acquainted with this part of US history. About 100 years ago there were railroad and oil monopolies (Standard Oil). The US stepped in and broke up Standard Oil and also handled the railroad industry - I'm sure that state banks would be well regulated as well to prevent what you're suggesting.
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Old 11-05-2012, 08:14 AM   #15
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Default Re: Do you think the Federal Reserve helps or hurts the American economy?

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Sure. The FR exceeds the market by restricting the money too much and other times by flooding the American economy with too much money. The American economy can better manage its money than the FR can.
OK, First, do you know why the central banks (such as the FED) put money into the markets, or restrict money from the markets...

when you understand why they do this, you'll understand why this is a good thing.

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Originally Posted by superman22x View Post
There is nothing government related about the Federal Reserve. Their name suggests otherwise, most people think they are run by the government. The government really has no control in creating money in our economy. Only the Federal Reserve does, in the form of loans.
but as already pointed out in this thread, the chairman/governor etc is elected by the government, and can be removed by the government.
this is the same as the Bank of England, the Government has no direct control of the bank, the bank is in itself a private entity, but if the people working there want to keep their jobs, they effectively have to do what the government says.
Thankfully for the bank, the governments instructions are generally based around controlling either interest or inflation. and are at best general instructions.


Quote:
Originally Posted by Tech Explorer View Post
The way I see it, local and regional banks would be more responsive to their respective economies than the Fed ever could be so I think the country would be better off not having these banks not tethered to the Fed. And isn't it true we didn't have depressions before the Fed existed?
Do you really believe this?
really really,
I can't find the current figures for FED borrowing.
but in britain, the BOE interest rates are 0.5%
i.e banks can borrow from the government at 0.5%
that means that for banks business has never been better, they can get their hands on vast sums of capital very cheaply.

The fact that lending to banks by the central banks is low however does not mean that borrowing from banks is low.
in fact, borrowing from banks is currently, interest wise, at an all time high, (with rates being some of the highest ever seen).

Whilst the approval of new loans is at an all time low.

When you think about it, this is weird.
not so long ago banks were borrowing at much higher rates, and you couldn't move for them trying to throw money at you and record low for consumer borrowing rates.

now banks have far less interest to pay, (and thus lower risk exposure to non-payment by consumers), - also they are charging consumers more than ever before. - to the point where if a bank borrows $10,000 over twenty years. and lends that to you on a card, in your year month you are charged twice as much interest as the bank will have to pay even if they let all the interest compound until the final year.

It's not the fact that central banks are trying to put market into the economy that is the problem, it's the fact that the "increased liquidity" is not being distributed properly by the banks. - in fact it's pretty much just being kept by the banks.

Yes, adding money to the market does have bad effects, (as well as some positive ones), but are you really suggesting that local banks, who have means to lend to local economies and are very much choosing not to, (rather than not being able to). would do a better job than a central establishment?
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