Should the U.S. eventually abolish the Fed?

andrew320 · Dec 27, 2012

Although it claims to be an independent agency, it has certainly become politicized (how else would the U.S. have a $16 trillion national debt and a trillion-dollar-plus budget deficit?)

With that being said, should the U.S. move towards ending the Federal Reserve System? It hasn't done anything beneficial in years: maintained near-zero interest rates, has a $2.9 trillion balance sheet (inflation), wants to increase its balance sheet to $6 trillion by the end of President Barack Obama's second term and the CPI has grown enormously since its inception.

Alan Greenspan even said that the Fed is the most powerful agency in the U.S. and no other department can override it. Yikes!

At first, the simple solution, in the meantime, is to keep spending below a certain rate, otherwise incumbents would ineligible for reelection. Later, a balanced budget. After that, get rid of the central bank in the next two decades.

What do you think?

myp · Dec 27, 2012

It has been politicized less than you think and they actively try to avoid being tangled into politics (see their actions prior to elections in recent years and how they've tried to tip-toe what they do). It is DC that can't leave them alone because of Congressmen who don't understand what they are talking about and are just trying to get votes.

I don't understand how you can make the claim it hasn't done anything. It has done so much! It should have done more but DC again is in the way with political threats. The expansion of the balance sheet was a good thing- inflation has been below 2% annually since 2007- they should've actually expanded more. Where do you see rocketing inflation?

Also, a balanced budget is a horrible idea considering the Federal government has no capital budget.

tecoyah · Dec 27, 2012

When we get rid of the Fed...we will become a failed experiment.

bluefig · Dec 27, 2012

The Fed is a check-kiting scheme. It returns 97% of its "profits" to the Treasury. If that is private, then so is every government agency.

See the following article for the stats:

http://www.zerohedge.com/news/2012-...fund-about-make-us-treasurys-life-much-easier

As to our experiment ending if we end the Fed: hogwash. We have abolished central banks before and our experiment did not end. That said, I don't think there is a way to avoid monetary failure at this point no matter what we do. The dollar is literally backed by nothing at this point. I have hope that after the crash we can establish a more stable monetary policy.

myp · Dec 27, 2012

The dollar is backed by nothing in the same sense that everything is backed by nothing.

And ZeroHedge is hardly a source for non-biased info. More like a sensationalist circus.

clax · Dec 27, 2012

myp said:
The dollar is backed by nothing in the same sense that everything is backed by nothing.

And ZeroHedge is hardly a source for non-biased info. More like a sensationalist circus.

The train they say the dollar is backed by nothing is that at one time it was backed by gold. Gold has value because everybody wants it, dollars don't get that same amount of desire.

The dollar is a concept a figment, tangible assets are not. There is actually something with a tangible asset. Dollar is just an idea. The reason gold is bauble is because it is actually something that people want and can use, it is matter, matter always has more value than ideas

myp · Dec 27, 2012

clax said:
The train they say the dollar is backed by nothing is that at one time it was backed by gold. Gold has value because everybody wants it, dollars don't get that same amount of desire.

Actually the market seems to want more dollars than gold going by the way institutional investors and foreign countries are putting their money.

clax said:
The dollar is a concept a figment, tangible assets are not. There is actually something with a tangible asset. Dollar is just an idea. The reason gold is bauble is because it is actually something that people want and can use, it is matter, matter always has more value than ideas

Gold has value because people see value in it. Same thing with the dollar. There is literally no difference. The dollar is not an idea- it is a thing too- you can hold it in your hand or see it on a screen, can't you? And I disagree that tangible things are worth more than ideas- ideas can be quite powerful things, but that is a more philosophical and off-topic discussion for some other time.

clax · Dec 27, 2012

myp said:
Actually the market seems to want more dollars than gold going by the way institutional investors and foreign countries are putting their money.

Gold has value because people see value in it. Same thing with the dollar. There is literally no difference. The dollar is not an idea- it is a thing too- you can hold it in your hand or see it on a screen, can't you? And I disagree that tangible things are worth more than ideas- ideas can be quite powerful things, but that is a more philosophical and off-topic discussion for some other time.

You can't hold a dollar in your hand, you can hold a federal reserve note that represents a dollar amount but it is good for nothing except exchanging for goods or services, gold is a good, pizza is a good these things do something they serve multiple purposes. The dollar only serves one.

myp · Dec 27, 2012

clax said:
You can't hold a dollar in your hand, you can hold a federal reserve note that represents a dollar amount but it is good for nothing except exchanging for goods or services, gold is a good, pizza is a good these things do something they serve multiple purposes. The dollar only serves one.

I can trade my dollar in for a pizza. I guess I can trade my gold coin in too, but that is actually harder, not easier...

clax · Dec 27, 2012

myp said:
I can trade my dollar in for a pizza. I guess I can trade my gold coin in too, but that is actually harder, not easier...

Yes it is very much harder to barter than it is to use currency, hence it's existence. But the only reason dollars have value is because they can be exchanged for things that have a purpose or fulfill a need.

If I had fifty ounces of gold and printed out coupons that said that the coupon was worth such a percent of that gold lets say my currency was a kwatlu, a kwatlu would be gold, it's just whatever fraction of that gold i decide it is. In theory it could be traded for gold, if I never produce more kwatlus that kwatlu hadn't changed in value. As far as it relates to gold. If some odd event occurs or some other substance replaces gold's use than I am out of luck but that doesn't seem very likely

what I am saying is that because it has a use outside of bartering it is valued, the barter ability of the dollar is it's only value. Nobody argues that their dollar is worth more than other dollars, all dollars are worth one dollar, out isn't backed because nobody knows what a dollar is worth there is no benchmark at which to measure its worth. The system is supported by faith.

myp · Dec 28, 2012

A system backed by gold is also supported by faith. Hate to burst your bubble

What do you think establishes trust in gold?

But either way, let's move away from this discussion because the vast majority of the world seems to be fine with trusting the dollar the way it is. Gold is a lot more volatile than the dollar has been anyway, especially in the last few decades.

bluefig · Dec 28, 2012

myp said:
And ZeroHedge is hardly a source for non-biased info. More like a sensationalist circus.

What source would you like? They remit nearly all profits to the Treasury, this is not unknown. My favorite part of this Daily Beast article is it RIGHTLY calls the fed a part of government as if it is proof that government is profitable. Hilarious! I don't think they meant to do that:

http://www.thedailybeast.com/articl...ned-80-billion-in-profits-in-fiscal-2012.html

myp · Dec 28, 2012

They return profit to the Treasury- what's your point? They don't operate on a profit motive though.

Esperahol · Dec 28, 2012

Funny enough the dollar is backed to an extent by gold - Fort Knox, but then again what can be said of the dollar can be said of most if not all currency. Currency tends to be only as powerful as much as market forces allow it to be. Current market forces make the dollar fairly powerful even now.

myp · Dec 28, 2012

Esperahol said:
Funny enough the dollar is backed to an extent by gold - Fort Knox, but then again what can be said of the dollar can be said of most if not all currency. Currency tends to be only as powerful as much as market forces allow it to be. Current market forces make the dollar fairly powerful even now.

Exactly. The subjective theory of value... (although it should be noted that marginal value theories are also usually true at the same time)

clax · Dec 28, 2012

myp said:
A system backed by gold is also supported by faith. Hate to burst your bubble

What do you think establishes trust in gold?

But either way, let's move away from this discussion because the vast majority of the world seems to be fine with trusting the dollar the way it is. Gold is a lot more volatile than the dollar has been anyway, especially in the last few decades.

A system backed by gold is supported by golds mineral value, meaning the substance has a purpose other than currency.

Gold isn't currency, currency only had value because people pretend that it does things have value because they serve a purpose or fulfill a need. The only reason to have currency is to purchase products, such as gold, to use them in which ever capacity they.

Lets say that instead of gold we back it with land, being that golds purposes are vast and complex, land is simple. Land isn't valuable because of pretend value, it is bauble because it is used to grow food and build housing, much like gold. Money is only valuable because it buys these things, you can't live in money, money contains no nutritional value, money can't be used to grow food in or build houses on or conduct electricity or anything really.

True you can't eat land or gold you can't do many things with them but you can always exchange them for dollars, you can't always exchange dollars for either, lets say that inflation drives the purchase power of the dollar lower they are steadily loosing value, they don't ever really gain it,

Land and gold and other mineral assets value isn't based on pretend out is based on there use to us, what they do for us. Currency is given away in exchange for things the only reason out had value is that IOU can exchange it for things, that is why it exists.

It is out of pure absurdity that you say the value of any asset is faith based. If you dint feel like you need land any more you still need it. An artificial structure makes us need money.

myp · Dec 28, 2012

You like to say things you don't agree with are absurd, don't you?

clax · Dec 28, 2012

myp said:
You like to say things you don't agree with are absurd, don't you?

I can't imagine any one saying the only thing that gives mineral assets value is faith. I like to call absurdities absurd.

myp · Dec 28, 2012

clax said:
I can't imagine any one saying the only thing that gives mineral assets value is faith. I like to call absurdities absurd.

There could be reasons supporting the underlying faith and there are whether it be the US, gold, or something more tangibly useful like steel. But it isn't quite absurd or something that you can't imagine anyone saying. It is actually quite a popular and accepted idea: http://en.wikipedia.org/wiki/Subjective_theory_of_value

clax · Dec 28, 2012

myp said:
There could be reasons supporting the underlying faith and there are whether it be the US, gold, or something more tangibly useful like steel. But it isn't quite absurd or something that you can't imagine anyone saying. It is actually quite a popular and accepted idea: http://en.wikipedia.org/wiki/Subjective_theory_of_value

Your link proved me right, value is based on needs and wants. People want gold, people need land. Money is a idea or a system in place which helps people get their value.

Nobody wants or needs money but for to get things they want or need. So the things exchanged for that money have a value because people have given it that based in want or need. Money has value because it can be exchanged for such things. The only thing I could sere money being used for is fire wood if you couldn't use it to buy things.

The dollar is slowly loosing its value or its ability to be traded for wants and needs at a point they will loose it entirely. Things like land and metals will not loose their value that way. It would take a conscious decision by the entire world to make gold worthless, or the evolution of people not to need shelter or food to make land worthless. The dollar is on a one way course to worthlessness, its inevitable.

If there was plenty of everything there would be no need for money. There is never going to be no need for mineral substance, aside from annihilation of man kind

Should the U.S. eventually abolish the Fed?

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