"Even if Congress was willing to plunge into this issue again — highly
unlikely — anything it coughs up would be full of loopholes."
Loopholes that banks pays for....The "free market"
isn't free. Just like other forms of freedom it's always in a
knifefight with the tyrany of few that must try to rule the world. Why does
anyone think you can just leave ourselves defenseless to the whims of granduer
of evil men?What we need are special ops accountants that take out
the crooks before they cause too much damage."Truuuuuuuuusssssst
usssss", they plead.
As Jefferson was quoted as saying the one thing more threatening to this country
more than foreign armies is bankers. The idea that we should turn a blind eye
to banks, letting the markets (ie the banks) determine what is right, just
after we spent Billions saving them from their own recklessness is one only a
Banker could claim without bursting into laughter.Whats next,
letting people use the free market approach to speed limits.
Let market forces do it? Where were market force when the government has
to bail out t all the banks that were too big to fail?
This article was paid for and approved by the Banks.
So just what are "market forces?"Unquestionably, the biggest
player in the market is the Federal Reserve. It controls the money supply and,
as Baron Rothschild once said, whoever controls the money supply controls the
economy. The Federal Reserve is a legal monopoly supplier of banknotes. So how
is it that the main player in the economy is not even considered in this
article? It's like fish not being aware of the water they swim in.Banks are integral parts of the Federal Reserve Banking System, especially the
mega-banks. Without them, the banking system cannot survive. That's why
they're too big to fail, at least in their eyes.In order to
make banks a legitimate part of the market, the banking system can no longer be
a legal monopoly. They have to operate on the same business model as any other
business. There can be no rescue plan for them any more than there is for any
other business. Plain and simple, our banking model is a failure because
it's monopoly-based. And they're issuing nothing more than monopoly
money (double entendre intended).
Market forces are the "do nothing" option. We saw it in play when Lehman
failed. The Dow fell something like 600 points the next day and fears of runs on
banks surfaced. Basically market forces would involve not doing the bank
bailout. Do we really want to trust that market forces would've taken care
of that without hurtling us towards an even deeper recession? I'm not sure
what's wrong with regulation taking care of these things in a more stable
(not that we're doing great but we're way better off than Sept 2008),
We could all transfer our money to credit unions.They do care about
To me, the government has ZERO credibility. They have proven to me that they are
corrupt, immoral and incompetent. I would rather wait for someone with integrity
to come along who knows what they are doing before trying to fix the banking
system again. Last time that happened, hundreds of billions of dollars of hard
earned, taxpayer money was recklessly given away to horribly managed businesses.
Please, Congress and White House, if you are listening and have any soul left.
Don't involve yourselves any more in matters you are totally and completely
unqualified to involve yourselves in.
SEY,We had the banking system you describe prior to the Great
Depression. That didn't work out so well . . .
Twin Lights: We've talked about this before. Banks back then failed because
they were run poorly. They were not artificially propped up by a central bank.
They were allowed to fail, just as it should be. Banks are not sacred, anymore
than any other business is sacred. Those banks failed and caused panics because
of government interference, not in spite of it. I assume you've actually
studied the history of money and banking in the 19th century. Assuming that, you
know that banks were foolishly allowed to make loans they shouldn't have,
just like during the most recent crisis. They loaned out far more than they had
in reserves, again foolishly. When the real estate market crashed (or whatever
the bubble was at any given time), borrowers couldn't repay the loans. It
happens every time. When banks do stupid things like enabling speculators, they
deserve to fail.Bottom line is, banks should not enable speculation.
That's exactly what our central banking system does. The "wealth"
they help create is illusory and is the cause of the growing income disparities
and unemployment. Yeah, that's how "helpful" our central banking
SEY,Yes, but I don't agree.The money a bank fails
with is yours and mine. Where do depositors go to put money safely if the
banking system is subject to frequent failure? What about loans for businesses?
We have seen just a taste of this recently. If we have banks failing every so
many years it makes for a very unstable economy.We had it otherwise
for about 70 years due to a good mix of regulation and FDIC insurance. We need
that still. The answer is reasonable rules of the road with strong oversight.
Twin Lights: I have nothing against regulation. I watched (again) the Frontline
episode called The Warning last night. It highlighted what happens when those in
charge refuse to enforce the laws already in existence. The failures of banks
occur most often when laws and regulations are ignored to the benefit of the
wealthy speculators and to the detriment of the rest of us. In the 19th century,
for instance, when the gold standard still applied, government would step in and
suspend species payments to depositors upon demand. Banks knew government would
implement something similar to the 'Greenspan put' when things went
sour, and they did.Banks should not be in the speculation business.
They should be there to make loans based on sound financing only. Again, I have
nothing against banks making loans. When they go out on a limb like they did
during the 1920's because no one was losing, or in the 1990's because
internet stocks were a sure thing, or the 2000's because real estate is
"always" a safe investment, they open themselves to failure. When that
happens, banks and investors should be allowed to fail. But banks should never
enable such speculation.
SEY,SEYI have zero disagreement with you on the issue of
speculation. I am just no fan of the gold standard and I think the Fed is
necessary.Banks should be dowdy and predictable places to park
money. Speculative ventures should be wholly separate.
Twin Lights: in that case, you are at cross-purposes with the Fed itself. The
Fed exists to enable wealthy bankers and speculators to thrive, including the
most speculative investor of all: the federal government. What other entity
could enable the government to "invest" in fruitless and murderous wars?
Where else could politicians get funds for programs to pay back their corporate
cronies for their campaign contributions? I really don't care
if we have the gold standard or not. What we need is some way to tie the hands
of the Fed to stop their enabling ways. They are too much like a supplier to
drug kingpins. The kingpins get wealthier while the rest of us suffer. Income disparities have increased significantly since Nixon closed the window
to gold in 1971, so giving up that anchor is not inconsequential. We are now on
a totally fiat money system that allows the Fed to create money at will. No fiat
money system in history has ever survived. They always end in default. I
can't help but think this one will eventually, too. All this because of the
existence of the Fed. It's so predictable. No more comments
SEY,No. The Fed’s purpose is not to increase speculation. As
to enabling banks to thrive, of course. As to speculators, only if the
regulatory side is not doing its job.The Fed does not
"invest" in wars. That is the govt. for which the Fed is the central
bank. If you have a problem with a particular war, you need to take it up with
Congress and the President.As to where politicians could get funds
to pay their cronies. That is as old as the world.You want to
contain the Fed in order to tie up the politicians? Good luck with that.
Politics is power and the powerful will always figure a way to benefit
themselves. To use your analogy, drug kingpins will always find a new
supplier.The income disparities you cite are quite real but are
unlikely to have anything to do with gold. We had only the most nominal of gold
standards for decades prior to Nixon. It likely has much more to do with
globalization, taxation, and our manufacturing policies.Reference
fiat money not surviving, it has done so since at least the 1930s.
Twin Lights, your explanation of income disparities seems to site symptoms
instead of causes.The Fed would never admit they exist to enable
speculation or to make the rich richer. They tell us their dual mandate is to
maximize employment and to stabilize prices. But what they say and what they do
are two very different things.Alan Greenspan et al, with the
approval of then-president Bill Clinton, conspired together to quash any effort
by Brooksley Born of the CTFC to regulate the derivatives market--which happened
to be in her job description. She warned of the dire consequences that
eventually brought down the giant financial institutions. She was pressured to
resign. Would you still blame the regulatory side for not doing their job?No one said the Fed invests in wars. As SEY pointed out, the FED enables
the government to go to war. Without the Fed, how is it possible to spend
hundreds of billions, maybe trillions of dollars on wars of choice? So far,
taxpayers haven't had to pay a cent toward the recent wars. Government
borrowed it from the Fed.Finally, throughout history every fiat
currency has collapsed. This time will be no different.
CLM,Over time the Fed has demonstrated they have stuck to the dual
mandate reasonably well.Greenspan missed the boat. His faith in the
self-regulation of markets was his undoing. Of course regulation failed. The
govt. chose NOT to regulate the derivatives market. Had they done so, we would
all be better off today.I seem to recall a few wars in history prior
to the Fed and central banks generally. Somehow the politicians found the
money.Will the dollar ever collapse? Maybe. Certainly there should
the US no longer be a viable govt. But in that case, I am not sure my gold
holdings will do me much good.Please, we just need to deal with
reality. No modern economy operates without a central bank. If you don't
like the Fed, then we need to replace it with something that may look different
but has significant operational similarity.If you think we can
operate without a central bank, please show me the modern economy that does so.
I have looked. The lists I come up with include mostly totalitarian regimes
that have backwards economies such as North Korea and Cuba. These are not
economies to emulate.
The problem with the Fed's dual mandate is that it focuses on an
inflationary policy. It can do one thing, and one thing only: expand or contract
the money supply. Any time it contracts the supply, it creates a recession. Any
time it expands the supply, it sows the seeds of an eventual contraction because
permanent inflation is an impossibility. The Fed, therefore, is the source of
our 20th and 21st century booms, busts and the longest US depression ever.Of course there were wars before the Fed, but they've never been
enabled to a such an extent. Politicians are less hesitant to go to war because
citizens don't have to pay for them through taxes. There is a fatal
disconnect. Wars should be pay-as-you-go.Central banking is the
fatal flaw in the US economy. Even though all western economies are based on
central banking, does it necessarily follow that it's the right thing?
Can't they all be wrong? It looks to me like they're on the brink of
going down together.Semi-Strong: Both backward economies you
mentioned have central banks. Cuba, 1997; North Korea, 1947
CLM,It's not just western economies. It's virtually all
economies (as you help point out).You ask does that make it right?
No. But it certainly does lead to a question. If having no central bank is the
right thing, why is NO ONE doing it?Even more importantly, if NO ONE
else (with a modern economy) is going without a central bank, what are
guarantees do we have that it will work?Does central banking have
problems? Sure. But at least we know what they are. If we switch and crash
and burn the economy, what do we do then? Say "oopsie"?In
sum, we should not remake our entire economy based on an untested theory. And,
in the modern world, what you advocate is entirely untested. Even though all western economies are based on central banking, does it
necessarily follow that it's the right thing? Can't they all be wrong?
It looks to me like they're on the brink of going down together.Semi-Strong: Both backward economies you mentioned have central banks. Cuba,
1997; North Korea, 1947
CLM,Sorry about the last two paragraphs being repeated from your
post. I tend to copy and respond line by line. I didn't eliminate all of
your post. Sorry.
I'll be happy to tell you why nations choose to adopt a central banking
system. It's because it's profitable for those in power. It's
just that simple. It allows those in power to control the money supply and,
consequently, the economy. The extremely wealthy really dislike not being able
to stack the deck in their favor. Central banking is the mechanism of choice for
making it happen.It's true they never explain it like that. The
official version is, of course, that it helps to stabilize economies and prevent
financial panics. The Great Depression and the Great Recession put the lie to
that tale.There are historical examples of economies that thrived
without central banking or paper money. There's no time or space to go into
that here, but here's what I propose: what harm is there in allowing
competing currencies to legally exist alongside federal bank notes? Federal laws
prohibit such a thing because if there's one thing we know, government
hates competition.Give everyday citizens the power to determine what
they'll use for money and see if federal bank notes can stand up to the
competition. Fair enough?
We have that competition among nations. The dollar is the clear winner
internationally. Not that this could not change if we don't keep our house
in order.But within a country what you describe is simply confusing.
We had that in 1800s. It didn't work well enough to try to keep it.Does central banking serve those in power? As much as govt. does
generally. But those who believe in good govt. are also among the political
class and there are VERY few who recommend what you do.Surely if it
is such a great idea there would be at least a few countries trying it out,
right? Or are we supposed to be the guinea pigs?Whatever your
personal beliefs may be here, you surely must recognize the dangers in putting
our entire financial future into an untried system. That is just not smart.Until you can show me a model that indicates we can do this without
blowing up our economy, I will remain unconvinced. Frankly, so should you. As
fascinating an idea as it may be we need a future based on the practical.
No, we don't have that competition. Legal tender laws make it illegal to
use other currencies in the US for the payment of debts. Before those laws were
enacted, competing currencies existed in the US. They were eventually prohibited
not because they caused too much confusion, but because those in power were not
able to manipulate the currencies to their benefit. Semi-Strong, we
share a deep concern about the state of the economy and the stability of our
financial future. I understand your wish to stay with the system you know rather
than to venture into something different (but NOT untried!). The central banking
system has proven itself to be a failure, it's only a matter of time until
it defaults. The euro is in the throes of that very debacle. We will be next.My suggestions will not be given much consideration as long as the
current system reigns. But if I'm right about the coming default, what
then? I hope you'll be open to abandoning our inflationary and monopolistic
central banking system and returning the economy to the people who make this
country work: the American people.