The Creation of the Federal Reserve System

I'm not at home. I don't have access to a printer.

 

"If"

I'm just saying all factual information using data and stats shows that America is the most robust economy in the history of mankind by all economic standards. So obviously something we're doing is working.

There's no evidence supporting your claim either

Econ 101... learn it. If you want to go in to a depression over your stupid principles than so be it, the rest of us will try to prevent that.

Income is income regardless of where it comes from. And your assumption is that the Govt borrows from the private sector in order to spend. That's simply not true.

You aren't in debt, unless you choose to be... you are an individual, not a country.

Math

I never said the quantity of money has nothing to do with prices. I said the quantity of money with the velocity of money creates the demand. That means you can have a given quantity one year and have "x" productivity and the same quantity the next year and have "y" productivity.

 

When you look at the individuals who designed the original Aldrich Plan (Rockefeller, Morgan, Rothschild, Warburg, Kuhn/Loeb) - they were all competetors, meeting in secret together on Jekyll Island with government officials and Congressmen to draft a central banking bill designed to break up the money trust. But in fact, they WERE the money trust. You have to wonder why money trust competetors would meet together in secret supposedly to design a bill which was supposed to severely limit their financial power. The answer was that they were forming a banking cartel.

As with all cartels, its goal is to maximize profits by minimizing competition between members, make it difficult for new competitors to enter the field, and to utilize the police power of government to enforce the cartel agreement. The Federal Reserve Act was designed to limit competition (by deeming certain banks too big to fail, allowing smaller banks to fail/get absorbed by larger banks, forcing all member banks to adopt the same reserve ratios), enhance its member banks' profits at the expense of taxpayers through money creation, and use taxpayers to bail them out when their lending practices get them into trouble. Government in turn has the benefit of having money created out of thin air infinitely and forever - no taxes necessary, to pay for whatever it wants, which ultimately comes in the form of price inflation.

As with all cartels, the banking system benefits at the expense of taxpayers/consumers through higher prices. Government benefits becuase it does not have to raise taxes when people are not buying treasury bonds. Taxpayers and consumers ultimately lose. The Fed is a cartel between the banks and government.

 

Business groups for organizations all the time to influence Govt policy and law. That doesn't make the law or organization a cartel, defined in the sense of a business coalition to fix prices.

Then by your definition the Fed cannot be a cartel as thousands of banks have been formed and failed since it was established.

The fact that a government entity sets regulations or rules doesn't make a cartel.

How so?

Why not?

The government is a cartel with all business, if you want to look at it that way.

 

It is objective fact that the Federal Reserve exists by virtue of the legal monopoly on force that the government claims. It cannot exist otherwise because it would have no way to enforce it's rules on banks that choose not to be a member of its programs, nor any way to require that its notes be the sole legal tender. Perhaps you believe that a legislator's pen is like Harry Potter's wand and makes what they write into reality once the chief wizard puts his stamp on it. It really wouldn't surprise me if you do.

Politics is decided by rhetoric, not mathematical formulas. I'll give an example. California is moving fast on building a high speed rail network. When I asked the people in charge of it what are the costs per passenger mile, they said they didn't know and perhaps they'd find out once the rail line was in place. However, Southwest Airlines, which provides air service from Oakland to Los Angeles knows this number, and knew it before they started putting planes into the air. The government doesn't care about formulas because they don't have to attract investors nor do they need to convince taxpayers with anything but rhetoric and sophistry. The Federal Reserve doesn't exist because politicians had proof that it was better for the public and you won't find any proof that it was then or is now for the public.

Whether or not they have mathematical reasons for their actions does justify the value of the program. I'm sure that the high speed rail builders in California can provide great engineering models as to why they'll build a tunnel rather than go over a mountain with rail or why they use certain struts that can withstand major earthquakes, but that doesn't justify the rail system.

I know, you'd prefer that people remain ignorant and believing that the Federal Reserve is really there to help them. We have a lot of educating to do, that's a fact.

 

See my last post.

Yes, and think of all the banks that were allowed to fail that were not insulated from the free market as the "too big to fail" banks have been.

That was based on speculation of the value of the dollar, it had absolutely nothing to do with the real value of gold. You don't think the amount of gold in circulation suddenly cut in half in those couple of years, do you?

Actually, nobody does it because gold is not enforced in contracts as money due to legal tender laws. Government force is the only reason people do not use gold as money. That's not a valid reason.

That's not true. If there is a demand for gold, people will bring gold into circulation. Whether it's done through mining or pulling it out from underneath a mattress.[/quote]

You're talking about gold as a commodity, not gold as money. It's value as a commodity, when it's not used as money, is subject to speculation as if it were a commodity. Commodity bubbles are short lived and always return to reality eventually. That would not happen if it were used as money, and historically (over thousands of years) it has maintained roughly the same purchasing power. A fine toga in Roman times cost an ounce of gold, and a fine suit today costs an ounce of gold.

 

Sure it did. It was created specifically because there was proof that banks could not withstand bank runs and they knew the economy would crumble if there wasn't support on the banks. There is a very detailed history on how the Fed came about. Life wasn't all rosy before the Fed.

Sure it does. I don't know your specific Californian case but if they can't describe the profitability or the indirect result of increased productivity because the rail then they shouldn't build it. The Fed's are very adamant in describing why they are instituting a new policy. Have you ever read research papers from the Fed? Yea, they are 100s of pages of math and analysis. Your lack of understanding does not make you correct.

The only ignorant people are those that don't even know what the Fed does... and they legitimately believe the Fed has some motive to destroy the country. Just a scapegoat for the uneducated!

 

No they won't. They will lend it out. They have to.

Exactly, *all* banks do this. They must. At one time, however, banks could act as warehouses, providing a safe place to deposit savings (which weren't destroyed by inflation) at a small fee. Some people preferred this very low risk system as opposed to keeping cash in a mattress. The reasons that banks pay interest today is because there is a risk and in order to attract your savings, they have to pay you enough to overcome that risk. Part of that risk, of course, is inflation, another government program.

Safety deposit boxes are not safe places to keep cash. Banks, being members of the Federal Reserve system, have rules in place to make it unattractive to keep your cash in their boxes.

I know it's difficult for you to comprehend the idea that some people prefer safety over even the minor risk of banks. Instead, you can't understand why everyone doesn't just follow what the government thinks is best for them. You're fine with what is provided for you by law, so why not everyone else?

 

What with all those laws preventing banks from opening branch offices...

 

Banks do not loan deposits

 

Whether or not a bank can withstand a bank run doesn't justify the imposition of the Federal Reserve model. You might as well argue that since a dictator can't withstand the loss of popular support, he is justified in killing dissenters. Well, you would argue that, actually. I'll have to come up with a better analogy.

As for the economy "crumbling" without support for the banks, ANY instance you can point to of economic disaster in the history before the Fed, I can point to the government meddling that caused it. Name a date.

No. I asked for the "passenger cost per mile." This is not a difficult concept, but thank you for confirming that mathematical models are only important to you when you want someone to show why government shouldn't interfere in their lives. Government doesn't need them because, in your mind, whatever government does is naturally right.

That is not relevant to the justification of the existence of that organization.

I've seen the results. It's a failure. It was a failure from the start. Whatever their justifications using their models, their models almost always fail.

Like those uneducated people who have no idea of the history of science and philosophy and make outrageous statements. If they are educated in your model, it's no wonder they fall for scapegoats.

 

Never heard of a "safe deposit box" eh?

That is there business.

But now I get paid interest. I like that better.

Like what? Fees?

Can't argue your position without ad homs, eh?

 

Price fixing is only one of the goals of a cartel, not all of them. This particular cartel had its agreement passed into law.

Look at the ones who have failed, and look at the ones who have been deemed too big to fail.

I never said that's what made the Fed a cartel.

When the Fed creates money, depositers put that money into the banks, and the banks are able to use that money as a base to expand the money supply up to 10 times the original amount by loaning money that didn't exist in the first place. These banks can collect interest from these loans: they gain purchasing power that did not previously exist. In turn, that money supply expansion (if done at a faster rate than goods and services are being produced) will cause prices in the economy to rise, which taxpayers have to pay: they lose purchasing power through devaluation of the dollar. The banks gain purchasing power whereas taxpayers lose purchasing power. The more money the Fed creates, the more people invest that money into banks, the more banks can loan.

Becuase the Fed is on hook to create any amount of money that the government needs.

How so?

 

Correct. The government is part of the cartel.

 

Of course you can. Let's use the Panic of 1907. How did the Govt cause that, lol. The fact that you think a private sector with no Govt control some how can manage an economy better than no control is mind boggling!!!

Well how many cars does it take off the streets? Is it faster for commuters to get to and from work? Is it faster for shipping companies to get to and out of the city? How much does it save on demand for gasoline? There are many indirect cost savings from a high speed rail that isn't. What about the wages of the people building the high speed rail... what about the people building the high speed rail buying tons of crap from the local communities?

Sure it is

The results are only in your head. Any thing dealing with observational results prove that we have done nothing but explode economically since the advent of the Fed and control over monetary policy. Sorry that facts do not seem to bode will for you in this case.

Philosophers just say words, they are not to be trusted when it comes to things dealing with facts, data, and math.

 

But those banks don't get bailed out when their lending practices get them into trouble. Fed banks, especially the big ones, can get away with keeping interest rates very low for long periods of time, because they'll just get bailed out.

 

Give me one example of a cartel being passed into law, aside from the Fed.

 

Well hopefully you'll be able to print it out eventually, who knows when this site is going to go under. It would be a pity to lose the article.

 

I have the forum bookmarked I don't have the original source. Where did you get it. I'm trying to get access to the hotel printer.

 

My brother wrote it as a research paper. I liked it enough to post it here.

 

You've only focused on a few points of regulation of the money supply.

The Fed does not set bank lending rates, fees, interest rates paid, charges, lending protocol, or other factors banks compete upon.

Just a few. But that is not the norm. See discussion above.

It was not. If it were only based on the value of the dollar, you'd have seen other goods and services moving in price relative to gold.

You could buy far less stuff with an oz of gold in 1984 than you could in 1980, and far more in 2011 than you could in 2004. It's not based on the change in the value of the dollar, but in the value of gold.

I meant no other countries do.

Depends on whether they think the price will go up. Production has its limits. We've seen some increase, but a relatively minor one given the fourfold increase in the value of gold.

Why couldn't it be subject to speculation if it is used as money? People can still be on gold prices going up or down.

 

The Fed isn't a cartel.

If you want examples of Govt agencies that regulate business, I can give you many.

 

You are applying emergency actions by the Fed and the Govt to prevent economic calamity with normal operations.

I agree that there are banks to big to fail and should not be. However, that kind of regulation is not the Fed's domain, but the Govt's.

 

When the Fed is involved, it always creates money to do it. There is not a single exception. That's how it operates, by law.

Yeah, it's called the free market, which fortunately will always prevail in the end, despite the endless abuse it takes from the central bank and the government.

Yes there is, I've already explained it to you - you just chose to ignore it because it doesn't match up with your worldview. The Byzantine Empire experienced no business cycles when they used gold as money.

Eventually our descendents are going to look back at America and laugh at how stupid we were for letting our money and government be controlled by a bunch of corrupt elitists.

Has nothing to do with "econ 101", it has to do with morality. Please explain how it is moral, and please show me where in the Constitution it is authorized.

Lol, we're already in a depression...after decades of following the economic policy that YOU advocate. Try again.

Doesn't change the fact that the economy sucks, the national debt is mathematically impossible to pay off with this system, the dollar is becoming worthless and prices are rising.

The private sector purchases treasury bonds. Econ 101.

National debt destroys the purchasing power of my currency and causes high prices. Whether or not it adds to my personal debt is irrelevent becuase I'm still financially less prosperous than I would be otherwise.

Math is a concept, it's not anything tangible or some kind of intelligent being that sucks people's dollars away from them. But I know you knew that, you're just dodging the question, so I'll play along and ask again. What has caused them to have less money than they feel like they need?

Agreed. Now we can get back to my original question. How are we going to continue price inflation "for thousands of years" without destroying the currency?

 

Malaysia...they've been doing it for a decade now. Mostly for the Kelantanese dinar, not the Islamic Gold Dinar.