Does the United States need a Federal Reserve?

[brentspeak]

Some very general questions that I'll throw out (and I don't know any of the answers, that's why I'm requesting different opinions)

1) How has the Fed helped the average American?

2) How has it hurt the average American?

3) Why is there so much secrecy surrounding the Fed? Why can't it be audited?

4) Who, if anyone, is benefiting the most from the Fed (bankers, politicians, the People, ???)

[StrongBad]

1. I am not for abolishing the Fed. I'll give my answers to your questions.

1) By engaging in monetary policy, the Fed can manipulate interest rates to either control inflation or stimulate investment, thus ensuring the stability of the macroeconomy.

2) I wouldn't say that their policies directly hurt any Americans, but if one is in such dire straits that the health of the overall economy does not effect their personal situation, then the Fed is just indifferent to their plight.

3) What makes you say there is secrecy? All of their meetings and decisions on policy are recorded.

4) Since their main purpose is to set monetary policy, depending on your viewpoint you can argue for all three.

[brentspeak]

2. Quick replies to two of your answers:

2) Didn't Alan Greenspan, as Fed Chairman, play a gigantic role in creating the housing bubble by lowering interest rates to historic levels? Didn't he basically help destroy the American economy by doing so?

3) How can the Federal Reserve not be considered secret when it doesn't release details of meetings until five years have elapsed? Why does it refuse to allow itself to be audited, and have the results made available right away to the public?

[StrongBad]

6. And my replies...

2) One could definitely make an argument that low interest rates were one of the catalysts for the bubble, but there were other very important factors that combined with this caused the financial tsunami we are going through. These factors had nothing to do with the Fed.

3)5 years? The minutes and stated policy direction of last month's meeting on April 29th are already available:

http://www.federalreserve.gov/monetarypolicy/default.htm

[brentspeak]

10. Bloomberg News filed suit in Dec. under the Freedom of Information Act

to get the Fed to release the names of the secret recipients of $2 trillion, but the Fed still http://www.bloomberg.com/apps/news?pid=20601087&sid=apx7XNLnZZlc&refer=home">refused to release that information. [br />
As for Greenspan -- you agree that the Federal Reserve played a huge role in destroying the economy by inflating the housing bubble.

[StrongBad]

11. Response

Point 1: What are you trying to imply with this tidbit? The Fed didn't have to release such information as stipulated in the TARP legislation. Because they didn't means they're a secretive organization? They didn't break any laws. Again, their meeting minutes and policy decisions are readily available and not after a five year waiting period.

Point 2: No, you misunderstood what I said. What caused the destruction of the economy was a normal boom/bust cycle amplified by a widespread presence of toxic assets in the banking system. The housing market was due for a correction as nothing goes up forever, yet what caused it to crash at such magnitude were the worthless mortgages and credit default swaps that permeated the financial sector. These financial instruments have nothing to do with the Federal Reserve.

[brentspeak]

15. $2 trillions is what classifies as a "tidbit"???

Refusing to reveal the recipients of $2 trillion = Secretive.

You agreed that Greenspan's lowering interest rates was a major cause for the housing bubble. I know what you were talking about regarding the MBS and CDS, and I agree they have a lot to do with the financial meltdown. But where in my posts did I say they had anything to do with the Fed?

Actually, they do happen to have their roots in the Fed, as it was Alan Greenspan who personally worked back-channels to prevent any the regulation of derivatives.

[TheKentuckian]

3. No, I think it actually needs to go

[Davis_X_Machina]

4. With what would you replace it?

Show me an advanced economy without a central bank, and I'll show you a microstate.

Even Luxembourg has one.

You can argue about how it should be structured, etc. but you're deliberately embracing a leap 200 years back in time if you attempt to do without.

[DrToast]

5. Exactly!

[the other one]

9. Easy to replace the Fed AND eliminate the deficit at once.

Restore money issuing authority to the United States Government. Eliminate all private banks. All loans would be issued by the US Government, all government spending would be self-financed or financed from interest on loans.

[Zavulon]

14. Quickest way to bankrupting the country I can think of.

Doing that would also let Congress decide to print more money whenever it wanted.

The federal government is a miserably bad steward of money as it is. Giving it more control over the money supply would quickly have us begging for loans for the rest of the country's existence.

[Zynx]

18. The Fed is essentially a governmental institution.

[Hippo_Tron]

7. Answers...

1) The Fed has helped the average American in the same way that independent central banks have helped pretty much every other nation with one. It has allowed our monetary policy to remain relatively stable due to the fact that policy doesn't change every time we have a new Administration or a new Congress. Politicians aren't able to make shortsighted monetary policy changes just to get them re-elected.

2) The Fed has hurt the average American in the sense that it has been utterly neglectful of its regulatory responsibilities. Barney Frank has a bill (or at least he did last Congress) to give the Fed's regulatory power to other agencies since it doesn't seem to want to use them.

3) Secrecy in what sense? Yes their meetings are closed but so are most of their meetings in our government (as stated above, the transcripts are provided pretty quickly). When the Fed makes a policy decision, though, they do not keep it a secret. If they were to make it secret the financial newspapers and TV shows would speculate about what the Fed is doing and investors might take that to heart which may cause the opposite effect of whatever policy change the fed is trying to make.

The stuff about not being audited is nonsense. http://www.publiceye.org/conspire/flaherty/flaherty6.html

4) It is good for everybody

[the other one]

8. The Federal Reserve is a Fraud!

The Fed is a private company quasi-governmental agency that has usurped the money-issuing responsibility of the US Treasury.

Get rid of the FED and have the Treasury issue money.

JFK tried to do this. He got his head blown off for his troubles.

Watch this video and you will get a better picture.

http://www.youtube.com/watch?v=cr7vG0pnZCc

[AllentownJake]

13. I agree with the Kennedy assesment

I believe that of all the things Kennedy did during his Presidency his attempt to take down the Fed was the one that resulted in the powers that be killing him. The richest in the world are the world's biggest organized crime family.

[AllentownJake]

12. John F. Kennedy asked the same question

http://www.john-f-kennedy.net/thefederalreserve.htm

[BzaDem]

16. Absolutely.

If the Fed couldn't use short term interest rates to control monetary policy, we would be back to pre-1900 banking panics once every few decades that last for years (causing depressions much longer than the great depression). Any purported Democrat who wants floating short term interest rates is simply ignorant (similar to people who were opposed to the concept of a bailout back in September), as the results from such a policy would devestate the poor and middle class the most. This is the favored policy of the far-right Austrian school of economics.

If the Treasury assumed the responsibilities of the Fed, Congress could print money to finance whatever it wanted. This would be a disaster. The inflation that would ensue would act exactly like a flat tax, which would hit the quality of life of the poor the hardest.

We are very fortunate to have an independent central bank, like other industrialized nations.

[rucky]

17. Why don't we start by regulating it...

instead of having it regulate us.