Why Donald Trump must shut down The Federal Reserve

What you're talking about is a fundamental misunderstanding of how fiat currency systems work. If you'd be so kind, I would like to try to explain if you're interested.

 

At the risk if sounding patronizing (though I assure you I am not), can you define inflation for me?

 

Mr. Chris Brown got me digging and I now realize that
I had thoroughly misunderstood the phrase Sovereign Money.


https://en.wikipedia.org/wiki/Modern_Monetary_Theory

My understanding is that we are not yet doing this here in Canada.

www.BankingSystemFlaws.BlogSpot.ca/

 

Actually, the Canadian government, like the U.S. government, is Monetarily Sovereign. It has the unlimited, legal ability to create its own sovereign currency, the dollar.

Having that ability, the Canadian government never needs to ask anyone for Canadian dollars. It doesn’t need to collect taxes from its citizens. It doesn’t need to borrow Canadian dollars from foreign nations or from anyone else.

It creates dollars, ad hoc, by paying bills. The Canadian government never can run short of Canadian dollars, with which to pay its bills. Never.

When Canadian dollars were backed by gold, it was possible for the Canadian government to run short of gold, which would have meant the government would have had to borrow dollars or levy taxes, in order to pay its bills.

But Canada went off the gold standard on April 10, 1933, and since then has had the unlimited power to create unlimited dollars, without borrowing or taxing.

The problem is that the Canadian government, like the US government either doesn't understand this or doesn't want it's citizens to understand it. The Government promotes "fiscal responsibility" and notions of austerity which are all regressionary and do not service the public interest of Canadian citizens.

 

This is such a brilliant and encouraging explanation of what is wrong that
I am now going to attempt to put this in front of Nova Scotia's teachers who are
highly motivated at this time to study and understand this topic.

They are in the middle of a near strike, (work to rule specifically), with the
Nova Scotia government.


http://www.politicalforum.com/showthread.php?t=486137&page=2&p=1066963234#post1066963234

Thread: Subject: Government Update on Teachers (Nova Scotia Liberal Party)

 

On paper, the Federal Reserve banking cartel is already audited! But, a number of people believe the audit is based in incomplete and/or fraudulent information. I certainly don't know, but some of the finer minds regarding economics who post in this Forum devoutly believe that the Fed is, indeed, accurately audited, by Deloitte and Touche.

One of the more interesting perspectives on "the audit" appears here at Bloomberg: https://www.bloomberg.com/view/articles/2015-08-21/why-u-s-federal-reserve-needs-more-accountability

I used to think that the Federal Reserve System should be completely abolished, and that is still a very tempting thought. It was started 102 years ago by a gaggle of liberal "progressive" Democrats, led by Woody Wilson (who would later be elected president and stupidly get us into World War I). Now? Because everything in the world (except Russia and China) is completely run by central banks, it would probably be impossible to simply "abolish the Fed" at this point. BUT, its power should be greatly curtailed and diminished! It definitely should not (NOT) have the power to arbitrarily play with the money supply, and it should definitely not have the power to set interest rates! There should be no Federal Reserve "discount window" for individual banks to go "belly-up to the bar" and get money so that they can sit on it and make piles of profit just for doing that -- sitting on it!

Conjecture: the next world war, if there is one, will almost certainly be started by international central bankers. Indeed, that's what that whole thing in Ukraine was about -- the European Central Bank acting in concert with the International Monetary Fund to subvert the Ukrainian government with "loans". When that ploy failed, the central bankers simply rallied their stooges, staged a coup, and overthrew the legitimately elected government and its president. And that brought out Putin and the Russians who saw exactly what the ECB and the IMF were trying to do.

But I digress.... Sure, even Russia has a central bank, and perhaps we in the U. S. should have one, too, if only to function in this central bank-infested economic reality we've created. But these central banks should be kept on a very tight, short leash, with very limited power and responsibilities. We have a Treasury Department in this country, and we don't need a highly independent central bank to run the economy any damned way it wishes....

 

Watching creature feature internet videos again, are we? The Fed is not a private institution. It's a government institution.

Who do you propose to run the monetary system once you've eliminated the Fed?

Wow! You mean the Fed isn't audited?

Who told you that?

- - - Updated - - -

And who should run the money supply after you've abolished the Fed system?

 

What do you think would be the result if the USG stopped taxing and instead pumped $3.3T new money into the system every year?

Utopia? Bliss?

 

As you might suspect, I regard you as being one of those "finer minds" I referenced before. I do respect your viewpoints and fact-based information regarding the economy, generally, even if I don't personally like a lot of them on a purely philosophical basis. You and Akphidelt have convinced me that we are no longer in a situation where we can simply "abolish the Fed", but I definitely believe that the Fed should be much more restricted in its activities.

The money supply should be run by a properly organized and empowered Treasury Department. They "coin" the currency, and they should set money supply thresholds. And, within that framework, the Treasury Department should be completely and entirely responsible to Congress. (Good to hear from you... happy new year!)

 

Thanks. How should they be restricted and as to what.

The Treasury is a department of the Executive, completely and entirely responsible to the President.

Why do you think it would be better for the President to control the money supply as opposed to what is at least a quasi-independent government agency?

Happy new year to you too!

Presidents don't have a great track record with the economy and budget. With the money supply, you can really (*)(*)(*)(*) things up in a hurry.

Or, even worse, do you really thing Congress should have control of the money supply? That would be like giving an unlimited supply of candy to a baby. Those yahoos can't even balance a budget.

Congress created the Fed precisely because they were wise enough to realize Congress did not have the discipline to control the money supply.

 

A return to the gold standard simply is NOT POSSIBLE. Doing so would wipe out Trillions of dollars of wealth. You may say this fiat currency is worthless, but the market disagrees when they choose to accept my worthless fiat currency in exchange for goods and services.

 

I guess I would define inflation as a rise in the price of commonly used consumer items
that are considered necessary in our culture.

I am of the belief that our most influential economists and bankers are taking
an approach to inflation, that is tending to crush any rise in what could just as easily be
termed "optimism" rather than inflation.

I am now aware that the way I entitled this thread is flawed.... but it may
assist a certain number of people to become interested in some aspects of MMT/ Modern Monetary Theory.


http://www.politicalforum.com/econo...ter-fed-policy-pay-off-usa-national-debt.html


Could a real estate boom plus better Fed policy pay off USA national debt?

The gifted and rather famous Pastor David Wilkerson had some sort of vision back in 1973 in which
he was shown that America would eventually have a real estate boom........ but the boom......
wasn't in or near the cities...... it was more so in the area of the people who
supported Mr. Donald Trump for President.

For the record, the title of this thread is a quotation from an interesting article that I feel
deserves to be taken seriously, but....... I personally do believe that there is a better way to
do this........ and yes..... the result could be the most massive real estate boom in USA history that
could well result in the national debt of the USA being paid off in full!

(links back to post #1 page one of this discussion..... that I feel is related to this possibility).

 

I'm sure you will disagree with me, Iriemon, but I don't think that a central bank should be unilaterally, uniquely, and arbitrarily deciding what the money supply(s) should be. And even more than that, I strongly oppose the Federal Reserve being able to unilaterally, uniquely, and arbitrarily decide what interest rates should be! That is just so wrong! Interest rates should float, perhaps even on a day-to-day, or a month-to-month basis based solely on DEMAND! Yes, of course, once an agreement is signed between a bank and a borrower, or a bank and a person buying a CD for a period of time, it is cast in concrete for the duration of the loan/deposit. But what business has any central bank got setting those rates for YEARS at a time, based on nothing but its own subjective feelings about what those should be. Nonsense!

Consider: the price of gasoline and oil itself can, and does, fluctuate on a daily basis. The price you pay for avocados and asparagus at your supermarket can fluctuate from one week to another. Power to control money supply and set interest rates should not, IMHO, be concentrated in the hands of a few people sitting on the board of a central bank. But then, I admit it, Iriemon -- I'm a free-market enthusiast of Capitalism... with particular emphasis on the words, "free", and "market".

Honest conclusion: Is Donald Trump going to "abolish the Fed". Ha! Oh, HELL, no.... The power of this central bank and the power elite that controls all such internationalist central banks would flatly forbid it. 102 years after the Federal Reserve came into being, there is no power on Earth that can "abolish" it. BUT, I can't see why we can't put the damn thing on a short leash....

And should it "report" to a president or to Congress? The Obama years have reinforced my firm belief that having too much unconstitutional power concentrated in the hands of a "pen-and-phone" autocrat is worse -- FAR worse -- than having that power distributed among legislators and senators. But I'm certain you disagree.

 

1. More sustainable than the 'backing it up' idea.
2. Money that is used in commerce (currency) does not need to be backed up. There's a difference between treasure and money.
3. Gold and other items are inherently valueless. We attribute value to these things. Why is money different?

 

How would you propose to have the "free market" control the money supply?

Not to mention most informed people thing that would be a bad thing.

It reports to Congress regularly. It also works with the president via the Treasury Department.

Yes, I do believe that giving congress both the power to spend and the power to print money would be a complete disaster.

I do not believe Congress could exercise the self control and discipline.

 

The Federal Reserve system could have a very useful, helpful role to play in the overall management of such esoteric economic constructs as "money supply" and interest rates. Again, although it still gives me slight intestinal cramps to say it, I don't think that it would be possible or especially beneficial (given the international economic relationships with other countries) to "abolish the Fed". But yes, there have been times when a Federal Reserve Chairman and a President of the United States have been able to work together in ways that brought about genuine recovery and prosperity for the entire nation -- we saw exactly that with Paul Volcker and Ronald Reagan. And, with the sort-of, kind-of exception of the Clinton years, we haven't seen it since then....

Who should determine "money supply"? I don't have a knee-jerk answer for that... not in the reality of 2017. What I object to, though, is "that a central bank should be unilaterally, uniquely, and arbitrarily deciding what the money supply(s) should be. And even more than that, I strongly oppose the Federal Reserve being able to unilaterally, uniquely, and arbitrarily decide what interest rates should be!"

What causes so much antagonism between many of we Conservatives and supporters of a central bank is the fact that it is endowed with what amounts to total, unrestrained power to control everything in a country's economy -- and yet not one person in that central bank is elected by citizen voters!

You will respond that the Chairperson of the Fed is appointed by the president, but if that president is simply a political figurehead, and neither in possession of any deep understanding of economics, nor a believer in the axiomatic necessity for free-market capitalistic practices in a representative republic such as ours, how beneficial or useful is that president's choice? Classic example of two presidents who had NO understanding of what to do during and after the Great Recession: Simpleton Bush and Simpleton Obama.
Both Bush and Obama simply turned to the Fed and said, in essence, "I have neither interest or expertise in any of this mess -- so YOU fix it any way YOU see fit...." And that is exactly what Bernanke did. That is exactly what Bernanke-without-a-beard, Yellen, continues to do to this day.

You would say that it's all been good... during the past eight years the DJ average is up over 11,000 points, unemployment is down to 4.6%, and cheap money remains plentiful. I would observe that by picking "winners and losers", hammerlocking interest rates, and keeping total control of money supply, the Fed has manipulated the market into producing another gigantic "bubble" which must inevitably explode again, just as the last one did. I would further postulate that the real unemployment rate hovers near 10% (in accordance with the DOL's U6 report), and that Americans are indeed returning to the same disastrous behavior that brought on the last recession -- racking up debt, and borrowing against home "equity" because of the staggering increase in the price of houses over the last four years.

But to cut to the chase... no, I don't have the answers, Iriemon. But I feel strongly that representatives of citizen voters must be brought into crucial national economic decisions -- via Congress. Central bankers, making all their decisions in an insulated vacuum where they are really answerable to no one is not good, results in decisions that are frequently inimical to free-market Capitalism, and have connection to the government they are supposed to serve through only one political person -- the president.

Power should be redistributed so that Congress (and thus, the people) interests are more fully taken into consideration.

 

I would love to have this explained further Econ4Every1?

 

You misunderstood the context sir and in fairness, I could have been clearer. The claim with regard to taxes wasn't that the government (of Canada or the US) doesn't need to tax at all, it was that we don't need to tax citizens in order to pay for benefits for citizens.

Sovereign governments can create the currency they need to purchase whatever they feel is needed to provision itself (the government) and serve the needs of its citizens, limited only by the combined productivity of people, technology, and real resorces of the nation and perhaps to a more human degree the desire, and willingness of the people to try to understand how it's possible and be ok asking for it.

To your point, I will yield to Beardsley Ruml, a "New Dealer" who chaired the Federal Reserve Bank in the 1940s who wrote in 1964 and laid out what I believe are the only reasons a Sovereign nation needs to tax (“Taxes for Revenue are Obsolete” in 1946, and “Tax Policies for Prosperity” in 1964)

(1) as an instrument of fiscal policy to help stabilize the purchasing power of the dollar;
(2) to express public policy in the distribution of wealth and of income as in the case of the progressive income and estate taxes;
(3) to express public policy in subsidizing or in penalizing various industries and economic groups; and
(4) to isolate and assess directly the costs of certain national benefits, such as highways and social security. (ibid p. 26

(Italics reprinted from the blog of Billy Mitchell taken from Beardsley Ruml's original writings)

 

Excellent, yes, inflation is when the general price level rises, and as you point out, it affects us most when prices rise on the things we need most. food, energy, clothing and shelter to name a few.

Now I'll ask the next question rhetorically.

What causes inflation?

Generally, there are two two types of inflation.

Inflation is driven by increased demand (deman-pull inflation) and inflation driven by increased costs (cost -push).

In both cases, there can be more than one cause.

Generally, I think it's fair to say the one we think of most with respect to government policy is demand-pull inflation. The idea that increased government currency creation without an offsetting tax (deficit spending) will result in inflation as additional spending puts pressure on supply.

Some of you may have been told, as it is a common explanation, that the cause of inflation is when there are too many dollars chasing too few goods. Seems to make sense, right?

But what if I reorganize the wording?

Inflation happens when there's not enough supply to meet the current level of demand.

In the former, it's intuitive to believe that too much money is the problem. If only there were less money, inflation would fall and the purchasing power of each dollar would be restored.

In the latter one might take away that a shortage of productivity is the problem and if only we could make more stuff, prices would fall and the buying power of the dollar would return.

Now the former takes away from the economy the latter adds to it.

Now there is also a category of inflationary pressures that cannot be solved so easily as they can cause prices to rise and cannot be cured by any increase in demand.

Oil in the 1970's is an example. It was a product that was vital to our economy and, at the time, had no realistic alternative. As prices rose so did inflation. I'm no expert on the 1970's, but I suspect that strong unions at the time made the problem even worse. Unions, with their bargaining power, recognized the decline in the value of the dollar and had the power to push wages higher through bargaining. This resulted in a "feedback loop" of higher labor costs as employers paid more, inflation increased so unions demanded more and prices increased and unions demanded more...and so on.

Other causes of inflation that cannot be cured though any amount of increased supply are things like taxes and interest rates (which interestingly have both an inflation fighting and inflation causing element) and land scarcity. When the price of land increases it can causes prices to rise and since you can't make land (at least cost effectively), rising land prices can contribute to inflation.

Knowing that, when considering spending, especially deficit spending, we should look out into the economy and ask, are their ample resources and labor to do the jobs the government is spending money on. Will it cause a labor or resource shortage?

If yes, will those shortages be long term, or will the shortages create opportunities for new companies to form and meet the demand or old companies to expand or branch out?

If the demand can be met through reallocation of labor resources then inflation can lead to longer term economic and capital growth.

Think about the events of the last 10 years. Gas prices rose sharply. We had a decrease in supply relative to demand. Increase prices decreased barriers to entry to get into the business and it also made unproductive or inefficient sites worth exploring.

In the US this is the result:



The point is, rising prices in an economy with capital, people, raw materials, technology, and intellectual capacity can take advantage of rising prices (without fears of long-term inflation) in order to meet higher levels of demand if the nation in question has robust competition and does as little as possible to discourage new entries into the market.

If, when considering a beneficial government program, if you're asking whether or not a government program is "affordable", you are asking the wrong question. The government can literally purchase anything priced in dollars it creates. The real question is, are ample resources, people, and technology available to create whatever is needed to meet demand without driving long-term inflation. If the answer is yes those things are available, then your nation afford it.

From there, the real questions become, not questions of affordability, but a return on investment, opportunity cost etc...

Canada's biggest problem by far, in my opinion, is one of labor. The population of Canada is only a little larger than California. Otherwise, Canada is sitting on a gold mine of real resources (a fantastic benefit in this next century). Automation, that so many fear, will be a godsend to a nation like Canada IF its culture can adapt. In the US we have deep, deep seeded ideas of rugged individualism, that has served us well in the past, but, IMO, it will not serve the majority of its people well in the future. In the era of automation, our culture may hinder us as automation takes the place of human workers and we cannot figure out how to share the fruits of that labor.

I would say it like this. "We have been taught to fear inflation more than we fear unemployment" (I think it was Warren Mosler who said that)

Will all due respect to you Mr. Tate. I've read some of what you've written and I'd say you are a passionate person who cares deeply about his fellow citizens. I would also say you have a lot yet to learn about economics, though I applaud you for considering a whole new paradigm in Modern Monetary Theory. I try not to delve too deeply into politics when I wear my " (amateur) economist hat" as people can't see ideas for the politics of the person who's sharing his ideas.

The real question is, even if it could, why would you want to?

 

Some of the best real, well thought out, proposals for changing the banking system, the Treasury and the Fed, if you are interested.

Warren Mosler’s Proposals for the Treasury, the Federal Reserve, the FDIC, and the Banking System

 

The CB, despite common orthodoxy, "does not set the quantity of reserves and does not control the money supply (M1). It sets the cost of reserves; that is it."
(Emphasis mine)

1: Does the Fed target/control/set the quantity of reserves and the quantity of money?

 

If you don't mind, I'm going to support your claim...

In the case of the US dollar, fiat currency isn't worthless. I mean, you could make the argument it has no intrinsic value, but that's not the same as saying it has no value.

If you are locked in a cage with no one ever to come and save you, the key, while worthless in any other context, its value can literally be measured in the value of your life.

In a nation where the government can take your money, your property or your freedom for failure to pay taxes in the fiat currency of the nation, then it's value in the simplest of terms is measured against what you'll lose of you fail to obtain it and surrender it in payment.

Legal tender laws ensure that we all have the same problem and also ensure that we all need the same money. It is for this reason that we have all agreed (some more reluctantly than others) to store our labor in these squares of cotton and linen with numbers and dead Presidents that adorn them.

If you want to argue that, should the authority of the government be undermined, that fiat currency will be worthless, then I would agree, but I, personally, won't live my life in the assumption that any day it could happen. If enough people feel that way, then it risks becoming a self-fulfilling prophecy that never had to happen.

 

Very well, if tne Fed does not determine what a money supply shalĺ be, who/what does?

 

One more thought with respect to the Fed.

This is mostly my opinion and I don't claim to have any unique insight, so you may disregard this, but I suspect that before the Fed, the cost of doing business was high in the sense that there were many forms of currency, both by region and institution. The Fed sought to unite the nation's banking system and standardize the money system. I believe that this made doing business much easier and more stable than it had been in the past (something born out in the wild swings in the economy in the 1800's). In return, the US government, who was trying to entice the nation's largest banking families to agree to unite under one system, offered certain "perks", like cutting banks in on a small profit when the US government sold Treasuries. I suspect that the value of the services provided at the time was probably close to equal to the new found wealth provided by the US government.

I suspect over time that this arrangement between the US government and the banking system that, after 1913 was providing certain services in the public interest, was forgotten. Today with globalization, technology and the idea that all businesses have a fiduciary duty to make as much money as possible has transformed our banking system into a system that extracts wealth and resources from the rest of the economy. I fear, that unless we tame the banking system and remember that the wealth provided to it was part of an arrangement between the banks, the government and the people, that the people will suffer and so will the nation.

Here is a chart that I found that shows the wild swings in inflation prior to the Fed. I can't speak to its source (I can't find much info on pre-1900 inflation), but I have seen similar charts from the Fed. Such wild swings were really unhealthy and led to uncertainty. Also, note the frequency and length of recessions pre-1900.

 

Thank you. I'll read it tomorrow. Honestly, the Fed has always been a mystery to me. A central bank was not authorized in the Constitution, and yet its power over the economy is greater than any other....