I hear this a lot. I see it a lot. Ron Paul supporters and other types prone to screaming fits against government and for conspiracy theories yelling that the Federal Reserve is unconstitutional, does a lot of nefarious things, is not answerable to anyone, and in general should be done away with.
I realize that guilt by association is not very vigorous, but the same arguments these types of people make against or for things that I do know enough about the subject to form an opinion makes me feel that they’re kinda nutty about this one too. I mean, the Fed is 100 years old next year… Only now a fringe I am generally suspicious of found a problem with the concept?
But hey, a broken squirrel finds a clock twice a day. Maybe they have a point! I’m open to that possibility… But if they are loony about this as well, then I want to know why so I can refute it intelligently.
No doubt Will Farnaby will be along soon with a list of recommended books for you. These are deep matters that superficial dilettantes cannot appreciate.
In my thread about disaster response in a Libertarian world, he had a one word answer and never came back as of yet. Forgive me if I am skeptical of a robust discussion this time around…
I believe the argument is that by setting base-line interest rates the Federal Reserve distorts the Free Market and is therefor indirectly responsible for market bubbles caused by (in recent cases) keeping borrowing costs below the rate that a ‘Free’ Market would have set.
Even in cases where the Federal Reserve is attempting to use monetary policy to improve economic recovery it’s opponents would argue that it’s doing more harm than good.
This is not an unreasonable position, though it does lack any sort of real evidence. Crashes did occur just as frequently before the Federal Reserve existed after all and allowing the Free Market unrestrained control of interest rates could be disastrous if it went wrong.
Because they are unfrozen cavemen. Fractional reserve banking and fiat currency frightens and confuses them.
Oh yeah, many of them are older and have significant savings, so the barest, most miniscule hint of inflation sends them into apoplectic fits. They’re done working, so they no longer care about the job market and the unemployed.
That said, they did us all a great service by pushing for the Fed audit, which revealed the billions of dollars we committed to prop up our bankrupt financial system, and the greedy crooks in charge of them.
I’m sure name-calling is a very useful tool in GD.
Leaving that aside, there is some concern about the supply of money and resulting inflation. I think this is one of the issues that really worries knowledgeable fiscal conservatives, i.e. the fear that our astronomical federal debt will be eased by increasing the supply of money, and thereby paying it off in cheaper dollars. If you are in favor of the gold standard, then you can’t like the Fed.
I think we have been pretty lucky in past 20 or 25 years - inflation has been low and the Fed hasn’t done anything too off the wall. But there is something to be said for the idea that cheap access to money (i.e. low interest rates) was in part responsible for the real estate bubble and meltdown, at least as much as lack of regulation.
Roddy
If the goal is to pay off the debt, then who cares how cheap the dollars are?
Oh wait, I forgot, “fiscal conservatives” don’t actually care about the debt, they just can’t tolerate losing even a cent in value of their assets to inflation (and yet, they demand higher returns on their government bond holdings and savings accounts…funny, that.
Mounting deficits can (and will) eventually lead to inflation without any F.R.B. assistance. Worst case is the U.S. paying with T-bills of increasing discount rates until vendors accept only gold! Include me among those concerned about this, at least in the long term, but what does the Federal Reserve have to do with it?
Eventually the chief cheerleader for the bubbles was Alan Greenspan himself, a disciple of Ayn Rand.
Do those who disapprove of F.R.B. disapprove of its goals? If so, do they admit that they object to the goal of full employment?
I’d guess that simply the idea that any central authority controls and defines what our money is worth is anti-libertarian. Supposedly a specie-based currency would allow decentralized free market forces to determine the true value of money. Considering that governments have controlled the money supply since coining was invented, it’s a rather naive hope.
Its another lever that government has on the market (see monetarism) and Paul doesn’t want the government to be able to exert any influence on the market. He wants free range markets.
Is that before wampum makes a comeback? In other words, really, how much of a threat is that in reality? Doesn’t seem very bloody likely. And even if a vendor came up and said “Yo, pay me in gold,” wouldn’t the correct response be “pound sand, that was never the arrangement?”
The fundamental problem is that they’re not educated enough to understand what they’re afraid of. Money and banking is a complicated subject. It’s a semester long course for most business majors, and that leaves you with only an extremely rudimentary understanding of the concepts and practices.
Now imagine instead of getting that, you get just a few rantings by people who also don’t understand what they’re talking about. Also, instead of trying to educate yourself sincerely about a system you know nothing about, you approach it believing it to be nefarious and only learn a few scary sounding tidbits to support your view.
Imagine some amazing person who knows absolutely nothing about something as complicated as how government in a Democracy works. If you only told that person a few scraps of knowledge and perverted what you did explain to make Democracy sound as scary as possible, that person would probably think Democracy is evil. They wouldn’t know enough to really explain why… but they’d believe it.
Our money and banking system is at least as complicated as government, conceptually, and millions of people know absolutely nothing about it, but are very open to being scared.
I did say “worst case.” And it will be the vendors saying “pound sand” when contracts for future deliveries are negotiated – heaven forbid that I’d imagine contract violations in a thread about libertarians!
But, although it may seem to ally myself with right-wing goldbugs, I do think the dollar’s value is under severe long-term threat. Those who answer “No, the long bond is still priced near par” ignore that the Efficient Pricing Hypothesis is not inviolable: houses and stocks were priced at knowably unsustainable high levels; why do you think that’s impossible for the long bond?
I meant his supporters. I’ve never read Paul’s views first hand, but from what I’ve heard I’ve always found it hard to believe he could have held them for so long and been so public and so fundamentally misunderstood the basics.
So I decided to check them out and found this page:
I didn’t read very far because unfortunately he’s not really expressing his views, he’s trying to describe how he thinks things work to a very uneducated audience, just like I claimed in my first post. I got this far though:
[QUOTE=Ron Paul]
Can you see how this lucky one-time incident which at first seemed so exciting was extremely harmful not just for you but for the entire country? You briefly had a good time but now you’re worse off than before.** In our story there are now twice as many dollars in circulation, but your income remains the same and each dollar you earn is worth only about half as much as it used to be. You’re really hoping for those money elves to come back.**
[/QUOTE]
This doesn’t follow from the even the silly analogy Paul made about magic elves. In the very next paragraph he acknowledges that you’d just demand your nominal income be doubled as well. Then there’d be twice as much money in the economy, everything would be twice the price, and you’d earn twice the income to pay for it all. It’s not “extremely harmful” at all. Basically the only harm is that businesses had to print up new menus with the prices higher.
That’s as far as I could stand reading, but it doesn’t really sound like Paul gets it either.
Nonsense. The Fed has always been audited (currently by Deloitte) and the Audit the Fed bill was nothing more than political jackassing. In Ron Paul’s case it was to weaken the Fed so that we returned to an inflexible gold standard thus dampening the Fed’s ability to intervene in a crisis.
The Fed profited from every loan it made during the 2008 financial crisis and returned over $70 billion per year to taxpayers via interest paid by those “greedy crooks”.
Libertarians believe that there is something called the “free market”, which would distribute property fairly and equitably (according to who deserves it) if left to its own devices. (In fact markets exist only because of the rules and regulations that define them; they would not exist otherwise.)
Libertarians believe that real money comes out of a hole in the ground. Money created by bankers - or worse, by government is inherently evil.
Because the Fed is both a bank, and part of the government, and creates money “out of nothing” you can see how they’d see it as evil incarnate.
Their annual financial statements get audited. This was a full-blown, comprehensive, rectal exam of an audit, which had never been done before. And that “political jackassing” had bipartisan support, including that cranky reactionary Bernie Sanders. And it revealed $16 trillion in emergency loans over 2 1/2 years, including $3 billion to European banks, and massive conflicts of interest.
And I wouldn’t call loans to prop up zombie banks profitable in any meaningful sense.
