Thursday, April 09, 2009

Don't Fight the Fed. Please-Comment to Forbes

Forbes Magazine has an article defending the Fed:
Don't Fight The Fed!

The Federal Reserve already has more independence than it is able to take responsibility for. It has consistently failed the general public in its dual mandates. Inflations always benefit the upper 5% of the folks who control the money; and, second, there has not been full employment since the Fed’s inception. The Fed is 17th Century irrigation system, with limited pumping stations or power, trying to manage a complex navigation system, with huge reservoirs, locks, gates, and myriad of channels, with billions of boats that need to be kept afloat. The Fed can’t do it; it has not done it adequately; and unless subjected to radical changes, it will never do it. It should be able to control the flow in every segment of the system, but the only tool it has is macro-economics, which is far from scientific, and at best, educated guess-work based on statistical and historical past, all of which perpetuates the trickle down system. There is no real-time action available to respond to irregularities in the system with the speed necessary to manage them. As you read modern financial papers and analyses, you can observe, just as in this article, that nearly all statements by economists and their supporters are couched in conditional words, such as might, could, maybe, and so on. That’s the nature of a trial and error system.
The tools at the Fed’s disposal are always detrimental to the rank and file and the real economy: where the wealth is created with labor and intelligence. They are also always beneficial to the financial markets and the financial institutions wherefrom the Fed’s leaders are always recruited. Forcing taxpayers to soak up the financial community’s toxic assets isn’t the only penalty to the population; but to continue to pay these folks huge bonuses, and transferring the country’s wealth to it, with the nod of the Fed, President, and Treasury, will not be forgotten or ignored by the population. Control of money creation, and distribution by the elite, is a little talked about reason for the American Revolution. The act of mucking around with people’s productive capacity and keep reducing isn’t something that people will let pass, like they tolerate many other insanities by rulers and leaders.
The creation of money, credit, and any form of purchasing power begins with human labor and intelligence applied to resources, and is therefore subject to the will of the folks in the real economy. These posts should be elective posts, with strict academic, experience, and good sense requirements, and have a mix of as many divergent views as are in the society at large. All necessary should be done to prevent these posts from susceptibility to the influence or control by special interest groups. They should also be mandated to act for the general benefit of the society, with equitable wealth distribution, no poverty, and no hunger. It can be done; and the criteria to budgets would be dependent on whether we have the human and natural resources to fulfill a social need, and NOT whether the financial community will deign to “lend us the money.”
Economists and other professionals don’t help much when they glibly spout the same sterile theories they learned with the MBA’s, within the same narrow envelop taught there, with no viable innovations and solutions.
Take a simple one: If the Fed has the responsibility for employment, why hasn’t it the power or the initiative to take direct action, and pumps instead huge sums of money into financial institutions in the hope they will start lending? The concept of maintaining a growth of money at a rate of growth of the real economy is a no-brainer: The Fed should issue a bulletin to the nation calling for programs companies and individuals for which funding is required, and for which people will be necessary and hired, and choose as many as necessary to employ the entire unemployed population in a matter of months. The money wouldn’t be loaned: if the funding was proven productive, and added wealth to the society, the money need not be repaid. If no product (wealth) was added to the system, it has to be repaid by either the borrowers of taken out of the system; otherwise, money in circulation not matched by real wealth is inflation.
Of course, this would trigger or require other modifications, such as it would have do away with the need to recycle the same money through the Modern Money Mechanics multiplier, and banks wouldn’t need to exist except as a bookkeeping system, and provide rudimentary banking services. Products would be monetized on almost 1 for 1. Of course, this would require a way to monitor the velocity of money, and a quick method of freezing portions of it for short periods of time, such as one who is managing a water system for a city, can shut off or open any valve anywhere in the system as the needs of the system require it.
The author if “Don’t Fight The Fred. Please,” says the “warning shots may have already been fired,” with a Senate nonbinding resolutions calling for, among other things, more disclosure from the Fed about institutions to whom it lends. What a novel idea to make the public aware of what financial institutions do with the public’s money!
It will take time to reform or get rid of the Fed, if it were to happen at all. But the Fed has been shoved down our collective throats, so we needn’t either love or defend it.

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