It’s Time to Dump the Fed

by Mike Whitney / February 25th, 2008

The credit storm which began in July when two Bear Stearns hedge funds were forced to liquidate, has continued to intensify. Last week the noose tightened around auction-rate securities, a little-known part of the market that requires short-term funding to set rates for long-term municipal bonds. The $330 billion ARS market has dried up overnight pushing up rates as high as 20 per cent on some bonds — a new benchmark for short term debt. Auction-rate securities are now headed for extinction just like the other previously-vital parts of the structured finance paradigm.

The $2 trillion market for collateralized debt obligations (CDOs), the multi-trillion dollar mortgage-backed securities market (MBSs) and the $1.3 asset-backed commercial paper (ABCP) market have all shut down draining a small ocean of capital from the financial system and pushing many of the banks and hedge funds closer to default.

The price of insuring corporate bonds has skyrocketed in the last few weeks, making it more difficult for businesses to get the funding they need to expand or continue present operations. Much of this has to do with the growing uncertainty about the reliability of credit default swaps, a $45 trillion dollar market which remains virtually unregulated. Credit-default swaps are a type of financial instrument that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to adhere to its debt agreements. When the price of CDSs increases, it means that there is greater doubt about the quality of the bond. Prices are presently soaring because the entire structured finance market — and everything connected to it — is under withering attack from the meltdown in subprime mortgages. As foreclosures continue to rise, the subprime loans that were transformed into securities will continue to unwind, destroying trillions of dollars of virtual-capital in the secondary market.

http://www.dissidentvoice.org/2008/02/its-time-to-dump-the-fed/

Always nice seeing you :hi:

Good to see you my friend! :hi:

or did I miss somebody ?

It should be clear that the Fed needs to be reformed and the whole banking system re regulated now that we've got a clear demonstration that deregulation just allows the thieves to set up shop.

Throwing it out completely shouldn't be an option for anybody but the most muzzy headed libertarian types who are libertarian because they don't have a clue how economies work and think some magical fairy will keep everything in balance and all participants honest.

All nations have central banks. The Fed is ours.

if Paul (a Libertarian) believes in the constitution, he should know and obviously knows that the president and congress have the power to issue money.


Some people suggest that FDR did a de facto nationalization of the Fed during his time

http://links.jstor.org/sici?sici=0021-8723(197103)57%3A4%3C864%3AR1ME%3E2.0.CO%3B2-9
http://tinyurl.com/2mfgyf


Although he is criticized by this writer for that, without hinting that the Federal Reserve Act was a love act by the finance oligarchs (He even makes it sound as if the founders were against it).

Your last statement says "He"

Do you mean Ron Paul?

Or do you mean the writer of this article?

And BTW it is my understanding that the founders of the United States definitely would have been agtainst a Federal Reserve Bank that is operated out of London, in the uK, and that has no real relation to the needs of the citizens of this country. If the FR had that, we would still be on the gold standard.

That stuff is way out of my field, and I appreciate it.

I think the corrupt money, CDO and MBS peddlers are the culprits here. Those guys are the ones who brought the termites into the house.

But I'm sure the Fed has some involvement. I remember when the Chimp in chief was lauding the rate of home ownership in this country being at an all time high. ANytime Dumb-ass talks about something like that, my ears perk up, because it's always some scam. Fact is, since 911, the only two things that have kept this economy afloat was real estate and war.

And now it's time to pay the fiddler.

Very sad.

WE the people of the bankrupt US.
WE have no gold. (no one since Ike looked in Fort Knox)
WE have an infrastructure that runs on oil.
WE sold our industries.
WE sold Hawaii to Japan.
WE sent our money to the Caymans.
WE depleted the world's wealth on our good name from WWII and gave it to a few people most of whom were opposed to our fight from the beginning.
WE spent our good-will, our brand-America and are now hated around the world.

NOT much left.

WHY? Do our FED families want to move to South America next? Or is Africa next? Or, do they just want to control the Amero next and dump us like a poor relation?

I can barely wait for the Asian Aseo, then finally the world's Wareo.

Then again, I can wait.

I am tired of people put down the Fed when they don't know much about the banking system. The Fed helps regulate the economy so that there is stability in the system.

The Fed's job isn't easy. If they lower rates, everyone complains about inflation and how it will hurt the economy, but if they raise it, people complain about contracting economic growth. Ben Bernanke is a smart person and he doesn't want to bail out people who took excess risks, but at the same time, he doesn't want the financial system to collapse.

If there were an easy solution to the problem, it would have already been done.

We probably need more regulation, but it is hard to come up with regulation to solve this situation that wouldn't create problems in other areas in the economy and financial markets. Simple knee-jerk reactions like dumping the Fed are just ignorant.

recessions were much more frequent and sharper. They led to the rich getting richer by buying up cheap assets, to economic pain and insecurity for most Americans, and to lower long-term economic growth.

Money was tight before the Fed and progressives railed at the Federal government for restricting lending and keeping asset values high at the expense of growth and jobs. The lenient monetary policies the Fed has pursued since the 80s have been good for most Americans by allowing an unusually long-term expansion. Just because this was done by bankers and happened under Republicans seems to lead a lot of DUers to adopt positions more compatible with Ron Paul's outlook.

To suggest the Fed didn't prevent the Great Depression may be true. To suggest that they should not be trying to prevent the another recession or that they should not exist and leave the economy to booms and panics seems perverse.

His deregulation rhetoric and actions were not healthy for the nation's economy.

let's wait and see how these interest rate cuts affect the economy.