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Let's Call A Halt To This Fed-Bashing. In The Longer View Its Record Is Strong

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http://www.independent.co.uk/news/business/comment/stephen-foley-lets-call-a-halt-to-this-fedbashing-in-the-longer-view-its-record-is-strong-2139291.html

US Outlook: Really thought we had this one licked. Last year, when internet star, and one-time candidate for the Republican presidential nomination, Ron Paul wrote his book End The Fed, it seemed he might be moving his central-bank-bashing agenda closer to the mainstream of US politics. His attempt to bring the Federal Reserve under greater political control (a precursor, he hoped, to destroying it) fizzled out in the discussions on Wall Street reform. But no, we did not have this one licked.

The politicisation of the Fed is a worry all over again, thanks to the fabricated outcry over its $600bn (£375bn) monetary expansion plan. This is the plan that the Fed itself calls quantitative easing and its opponents call "stimulus" in order to associate it with the despised fiscal stimulus last year. It didn't live up to expectations, and now the Fed-haters are back in a more dangerous, virulent and politically powerful form.

The bank was charged after the Second World War with ensuring both price stability and full employment, but some senior Republicans are trying to tinker with that dual mandate. In the fog of ignorant commentary, they have seized their moment to argue the Fed should no longer see to it that every American who wants to work, can. Fed chairman Ben Bernanke ("The Ben Bernank", as he is called in an anti-Fed cartoon circulating on YouTube) looks decidedly uncomfortable. Ron Paul and his fans are licking their lips. The rest of us should get educated, get active and protect ourselves by protecting the Fed's independence.

So, can someone from the political and economic mainstream please write a book called Defend The Fed? I want to suggest a few chapter headings:

1913

If the Federal Reserve did not exist, it would be necessary to invent it. The economic world before its creation was nasty, brutish and – for far too many businesses – short. The bank was formed in 1913 to halt a string of financial panics, including a whopper in 1907. Panics (as anyone who was alive two years ago knows) lead directly to deep recessions, widespread bankruptcies and high unemployment.

The Fed isn't all-powerful to stop excesses from building up, but by acting as lender of last resort, and smoothing the economy through interest-rate changes, it makes panics fewer and further between and it makes recessions shorter and shallower.

'Let me see if I can think of anything...'

Even beyond an unquantifiable number of panics averted, and recessions that weren't, the Fed can point to more policy successes than its opponents can point to failures. It was creative, flexible and energetic in responding to the unfolding credit crisis in 2008. It has kept deflation at bay for 60 years. It squeezed inflation out of the US economy through painful interest-rate rises in the early Eighties. Former chairman Alan Greenspan warned of "irrational exuberance" ahead of the dot.com bubble.

'Printing money' is not what you think

Forgive me, reader, for I have sinned. I have used "printing money" as shorthand for electronically creating bank reserves out of thin air – which is what the Fed is doing to the tune of $600bn through quantitative easing. These are not banknotes leaving the Fed building in wheelbarrows. Weimer Republic-style hyperinflation is not in prospect. Even in normal times, the Fed is manipulating the money supply on a daily basis; that is how, in practice, it lowers or raises interest rates. When it comes to the total dollars in the economy, the amount of lending activity that banks decide to do is actually much more important. It's complicated. The Fed can – and will – unprint money.

An interesting perspective about keeping deflation at bay for 60 years, that sounds more like inflating a bubble for 60 years that's just about to blow and collapse. Of course it depends on what economic fence you sit on whether you would view this as a policy success or failure.

Got to love the idea that because $600bn isn't in note form somehow the risk of Weimar hyper inflation won't happen. Perhaps because this time we have economic geniuses running the show rather than complete idiots like the Germans did.

Deflation is part of the natural economic cycle for me if you perpetually avoid it you will have a very painful and damaging bust.

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It could be argued that managed deflation is the sign of a healthy economy. For example computer parts getting cheaper but computer companies getting more competitive, more productive, bigger and more prosperous.

Indeed the inflation, even managed inflation, could be argued to be the basic sign of a declining economy. It's one of the things they argued in the UK in the 80s to justify their structural changes to the economy.

The fact that the "developed" economies are in such a mess after so many decades of inflation also seems to prove the point. Defeating deflation doesn't seem much of an achievement when you end up in crisis followed by crisis followed by more crisis. But as the eu is demonstrating repeated crisis is a good way of transferring power and reinforcing power (Ireland?) and that's probably more to do with what it's all about.

Edited by billybong

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Yeah, I second that, leave the FED alone. They're the best friend I could ever wish for. Keep printing lads! B)

I beleive, that when they last ran out of money, and tools to combat a BUST, they first starved the poor, then confiscated and made illegal the holding of GOLD, then were lucky to get production and profit from a foreign war.

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It could be argued that managed deflation is the sign of a healthy economy. For example computer parts getting cheaper but computer companies getting more competitive, more productive, bigger and more prosperous.

Indeed the inflation, even managed inflation, could be argued to be the basic sign of a declining economy. It's one of the things they argued in the UK in the 80s to justify their structural changes to the economy.

The fact that the "developed" economies are in such a mess after so many decades of inflation also seems to prove the point. Defeating deflation doesn't seem much of an achievement when you end up in crisis followed by crisis follwed by more crisis. But as the eu is demonstrating repeated crisis is a good way of transferring power and reinforcing power (Ireland?) and that's probably more to do with what it's all about.

when was the last time you went out and demanded things were 2% more expensive?

there is no need whatsoever for inflation, or deflation come to that....if there is more wealth then deflation ( increase in buying power) is normal.

but not for banks.....

The wealth the UK produces is enormous....its just that most people dont get a look in...and this is the key part of inflation....money owners get more and more and more.....whereas, wealth creators get less and less and less.

to me, this seems a tad unfair.

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http://www.independent.co.uk/news/business/comment/stephen-foley-lets-call-a-halt-to-this-fedbashing-in-the-longer-view-its-record-is-strong-2139291.html

An interesting perspective about keeping deflation at bay for 60 years, that sounds more like inflating a bubble for 60 years that's just about to blow and collapse. Of course it depends on what economic fence you sit on whether you would view this as a policy success or failure.

Got to love the idea that because $600bn isn't in note form somehow the risk of Weimar hyper inflation won't happen. Perhaps because this time we have economic geniuses running the show rather than complete idiots like the Germans did.

Deflation is part of the natural economic cycle for me if you perpetually avoid it you will have a very painful and damaging bust.

Oh..Fed now has another job which used to be the job of the state department / treasury / foreign office / president. Now Uncle Ben has a new job in attacking China for running surplus/manipulating currencies etc as well.

Bernanke takes aim at China

http://online.wsj.com/article/SB10001424052748703374304575623144102357582.html

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Yeah, I second that, leave the FED alone. They're the best friend I could ever wish for. Keep printing lads! B)

Inflation is actually a friend indeed. But I have a heart for those who need to live on fixed income...

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I have just read that ALL Fed Chairmen since its formation have been Jewish. Surely this cant be true? Its stated in several places, albeint most are white supremacist, nutjob, sites. Regardless of the source if its true then it deeply disturbing.

Does someone know the facts?

Article is such nonsense I don't even know where to begin.

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I have just read that ALL Fed Chairmen since its formation have been Jewish. Surely this cant be true? Its stated in several places, albeint most are white supremacist, nutjob, sites. Regardless of the source if its true then it deeply disturbing.

Does someone know the facts?

http://truthordenial.wordpress.com/2008/09/11/federal-reserve-banksters-101/

Correction: I had stated that every Fed Chairman was Jewish; I was unable to substantiate this claim.** However, since February 1, 1970 the Federal Reserve has been chaired by Jews, except for a year and a half by G. William Miller. Here is a list of Federal Reserve Chairman since February 1970 in chronological descending order; Ben Bernake {Jewish}, Alan Greenspan {Jewish}, Paul Volcker {Jewish}, G. William Miller, Arthur F. Burns {Jewish}.

Another nutjob site but perhaps they haven't all been Jews.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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