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More Uncomfortable Questions for Fed Supporters

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September 04, 2009 – Comments (10)

It appears that I'm not done yet.  Look, nobody wants to go through life fat, dumb, and drunk.  Well, almost no one.  If I'm wrong about the Fed, there should be some answers to my questions.  Last post, I asked four questions for Fed supporters.  I received no answers.  Read the blog here.  The four questions were simple and concerned the following topics:

1. The Cantillon effect of money creation on the middle class.
2. The effect of inflation on fixed incomes.
3. The knowledge problem of central planning.
4. The proper amount of money in an economy.

My next series of uncomfortable questions has to do with Congress.  One of the Fed apologist's fallback positions is that monetary policy should be independent of the politicking of Congress.  Some take this position even further, citing Congress' incompetence as the reason why control of money should be in the hands of austere, wise, and noble gentlemen with perfectly trimmed beards.  Let's tackle the independence from politicking argument first.

Has the Federal Reserve ever acted independently in its monetary decisions before?  Nonsense. 

"By law, the Fed is independent. The president and Congress can do no more than name its seven governors, including the chairman. The governors share responsibility for monetary policy with presidents of the 12 reserve banks which are supervised by the board; these presidents are appointed by their banks’ boards and confirmed by the governors." - The Economist, Shill Magazine of Statist Propaganda

Would you consider Federal Express to operate independently of government if it's CEO and Regional Vice Presidents were chosen by the President and Congress?  How about McDonald's?  Walmart?  Betty's Trinket Shop on 4th Street?  

"By law, Betty's Trinket shop is independent. The President and Congress can do no more than name it's three shift supervisors, its manager, and owner.  Those people share responsibility for designing and marketing the trinkets with other employees which are supervised and appointed by the shift supervisors, manager, and owner." - Shill State Magazine

See how independent Betty's Trinket Shop is?!  Wow.  I feel dumb.  

So my first question for Fed supporters is, what evidence do you have that the Fed has maintained its sacred independence during its 96 year existence?  Honest Fed apologists admit that the record is rather bleak. Hmm, I wonder why?

The Congress is Stupid Argument

Of all of the apologist arguments,  this is my favorite.  The "Congress is Stupid" argument is perhaps the most stupid argument an apologist can make.  If Congress is so stupid and incompetent, how can you allow these individuals so much latitude in legislating the rest of our lives?  Certainly I can think of many important functions that Congress currenly controls which, if they are as stupid as you claim, they should perhaps back off.  Healthcare is one example.  If Congress is too stupid to understand monetary policy (a concept many simpletons here at CAPS understand quite well), why are they legislating how I will receive health care?  Why are my mandatory retirement benefits (Social Security) under their moronic oversight?  Why do they determine subsidies, tarrifs, oversee international treaties, etc?  If Congress is this stupid, how smart are the other sectors of government?  Who are these clows running the transportation grid, utilities, military, etc?

So my next question for Fed supporters is, if Congress is so stupid that it can't handle monetary policy, what the **** are we paying them for?

The Congress is Lazy Argument

Some might object that Congress isn't really dumb, but too lazy/busy-ruining-lives to handle monetary policy.  I wonder if these people understand why we have a Congress in the first place.

CONGRESS IS SUPPOSED TO ANSWER TO THE PEOPLE!

Sorry to shout.  But it needs to be said.  If you keep treating Congress like a day care center, don't be surprised when they never take any responsibility.   They act like children because you treat them like children.  You never vote them out of office.  You don't even make them take responsibility for war.  Do you know the Iraq/Afghanistan wars have lasted longer than WWII?  Congress isn't responsible for them.  They didn't declare war, like they should, so you can't blame them when they go bad.  Neat trick, huh?  Now think back to 2002, when the intellectuals convinced you that it was Ok for Bush to execute the war without a declaration.  Do you feel like a sucker?  

So my final question (for now) for Fed supporters is, how can you blame Congress for any failings if you are unwilling to trust them with something as important as monetary policy?

(By the way, in that same Economist article. they admit that the Fed never gets audited. I guess FinancialModeler was wrong again... See comment #4.

"That Congress may not audit the Fed or approve its budget provides an added element of security. But that may now be at risk.")

David in Qatar

10 Comments – Post Your Own

#1) On September 04, 2009 at 3:21 PM, catoismymotor (< 20) wrote:

David,

Once again you make some good points. A good portion of the public is mad at the direction things are taking. I imagine many of these people are the swing voters that cast a ballot for and now feel betrayed by St. Obama of Chicago. If this swell of anger and discontent carries forward we could have a sizeable shake up in the Congress in 2010. Talk about a group that needs term limits!

With Barney Frank and Ron Paul urging a audit of the Federal Reserve we may find a way to reducing the power of said monster bureaucracy. And how about those two teaming up? It is a pairing I never would have imagined. They look like Abbot and Costello.  

Keep fighting the good fight.

Cato

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#2) On September 04, 2009 at 3:27 PM, dickseacup (67.00) wrote:

I gave you a rec for stoking the fires of my anarcho-capitalist leanings this afternoon.

The Federal Reserve is no more independent of the government than our elected "representatives" are independent of the corporatocracy. It is a sham and a scam. The ruse is maintained only to avoid upsetting the proles.

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#3) On September 04, 2009 at 3:38 PM, DaretothREdux (45.50) wrote:

CONGRESS IS SUPPOSED TO ANSWER TO THE PEOPLE!

Now that's how you shout properly.

Dare

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#4) On September 04, 2009 at 10:41 PM, whereaminow (30.26) wrote:

catoismymotor,

Thanks bro. In case I never said so, love the name :)

dickseacup.

Lots of guilty parties.  It's all part of a system of extortion it seems. Glad to see another Rothbardian on here.

DaretothREdux ,

Young people are so much better at shouting.  End the Fed!

David in Qatar  

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#5) On September 05, 2009 at 2:23 AM, uclayoda87 (29.37) wrote:

Fat, drunk and stupid,...

Was he talking to Barney Frank?

 

The Congress ...

What they were like back then!

 

 

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#6) On September 05, 2009 at 4:13 AM, ryanalexanderson (< 20) wrote:

Ok, I'll bite.

Congress is "of the people", people like you and me. Actually, people probably less interested in economics than you and me, since the average person does not read financial sites every day. (naturally, there are exceptions like Doc Ron Paul). But it's not their lack of intelligence that concerns me - it's their view of short term vs. long term. 

 The average American is short-sighted, currently deep in debt, and always looking for that quick fix. A Congressman is happy to think the same way, and give them the fix.

The "wise old man" idea is good - just like the Supreme Court. Wouldn't want the Congress running that, would you? You want people versed in the theory and fundamental ideas of jurisprudence (or economics for the Fed), making the hard decisions that are fundamentally sound, yet unpopular.

Unfortunately, the wise old man idea hasn't worked for the Fed. It's become a popularity contest. I am nothing near a Fed apologist - to quote Jim Rogers, I think the chairman should fire everyone, and then quit. But, no, don't give Congress the power to create money. Give us a gold standard, and let the market set interest rates!

And I think you've answered your own question above - who trusted these clowns with Social Security? Whenever the short-term gains can be maximised at the expense of future prosperity, they'll do it. Guaranteed. 

 But I am in favour of an audit. Hopefully, auditing the Fed is the first step to ending the Fed. But -not- transferring its power to Congress.

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#7) On September 05, 2009 at 11:22 AM, eldemonio (98.58) wrote:

CONGRESS IS SUPPOSED TO ANSWER TO THE PEOPLE!

Let me begin by saying that I agree with you.  That said, when voter turnout is hovering around 60%, and the fact that most people don't even understand the issues they are voting for or against, it is no wonder why our elected officials think they can do whatever the frick they want.

Our Congress is filled with a bunch of self-interested, short-sighted, vote grubbers.  What does that say about us?

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#8) On September 10, 2009 at 10:03 AM, skeptic86 (91.97) wrote:

 

from Tim Knight's blog

In the spirit of Labor Day, I thought I'd say something about class.

There are some who call the United States a classless society. I certainly do not. But my view of "class" this morning only partly has to do with assets owned by a given party. It also has to do with how "in-the-know" someone is.

Allow me to crudely define this view using three groups:

Cornupecuniae - This is the ruling class. The top 1% of the U.S. owns 34% of the wealth. Since the mid-1950s, the "skewed-ness" of wealth distribution has becoming increasingly distorted. But the important thing here is the concentration of knowledge and power, because that upper echelons have, over the past few decades, turned the United States into a virtual plutocracy. Consider the ethics and well-being of Goldman Sachs, and you pretty much get the picture. We'll call this Group #1.

Ignoramus Felicitia - Here's where just about everyone else is. This is where people who really don't understand the world around them reside. They don't really read that much. They like their sports, their action movies, their sit-coms. They need distractions, lest they risk a chance of being exposed to something unsettling. As long as they can get their $1.99 hot dog/Coke-with-refills at Costco and have a roof over their heads, they're not going to cause any trouble. I'd say this is 95% of the country. Let's call this Group #2.

Illuminata Miserque - And here we have those who may or may not have money, but they have knowledge, and they find that knowledge distressing. They learn; they read; they converse; they dig deeper; but there's not much they can do about what they find. This, as you can imagine, is the realm of Slope. Every day there are superb articles shared here, and as a group we continue to learn more and understand better..........the principal result of which is agitation. We'll dub this one Group #3.

The rally which begin in early March and continues to this day (even on Labor Day Weekend, when the /ES simply thundered higher still), was created when Group #1 convinced Group #2 that everything was going to be OK. Group #3 knows things are not OK, but it stands aghast and bewildered that the reality they understand isn't aligning with the action in the markets. It all goes back to that annoying, oft-cited phrase that markets can stay irrational longer than you can stay solvent. The "irrational" part refers to the disparity between what Group #3 sees and the beliefs that Group #1 professes.

I don't have any ambitions to change the unchangeable; I simply want to be well-positioned and well-capitalized to profit from when reality becomes something that Group #1 can't hide anymore. (Of course, they too will be well-positioned for the fall; they're not idiots, you know; there's a reason they got into Group #1 in the first place). And, with that -- and the /ES approaching another lifetime contract high -- I bid you adieu.

which group do you think you belong to? how motivatied are you to change the world? it sounds like an aweful lot of work to me.

i like to think that the internet will change the world like the printing press did. 

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#9) On September 10, 2009 at 5:08 PM, whereaminow (30.26) wrote:

skeptic86,

Very insightful and true.

A man doesn't need to change the world to live a full and happy life, to make a difference.  That lofty aspiration is what drives sociopaths like Nancy Pelosi.

A good person with a good heart can make a difference, earn the respect of his peers, the love of his family, and make a little money too.  He doesn't need to change the world all by his lonesome.

I don't have any delusions about a libertarian revolution or any kind of victory over the current power structure.  But shall I just throw in the towel?  Well, what would I gain from that?  I'm not overly stresed, discouraged or sad by the current state of affairs.  I have a happy life regardless.  I'm also protected from a serious economic calamity by having a marketable set of technical skills and a large safety net.  Worry does not motivate me to post.

For me, it comes down to this quote:

"Everyone carries a part of society on his shoulders," wrote Ludwig von Mises, "no one is relieved of his share of responsibility by others. And no one can find a safe way for himself if society is sweeping towards destruction. Therefore everyone, in his own interest, must thrust himself vigorously into the intellectual battle."

Add me on Facebook

David in Qatar

 

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#10) On September 10, 2009 at 5:19 PM, BMFPitt (77.33) wrote:

if Congress is so stupid that it can't handle monetary policy, what the **** are we paying them for?

That's a good question, but doesn't change the fact that they're too stupid for monetary policy.  That doesn't mean the Fed isn't, but I'm suprised that most members of Congress can tie their own shoes.

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