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The gold standard ended for a good reason; the amount of cash required to keep our expanding economy fluid far exceeded the amount of gold that could ever be in the Treasury's possession. The system that replaced it was designed to solve the limitation of a hard currency, especially one based on gold. But like any Federal solution, it had numerous design elements that only helped to serve special interests.

IMHO: there is no way we can ever return to a gold standard, but a change to the current system is needed to keep inflation low. I agree that a low inflation rate is preferable to deflation.

I think you totally miss understood what hoarding of assets means.

Saving money isn't hoarding it. Bill Gates has very small % of his net worth in pure cash, which is federal reserve notes. You think he has $40,000,000,000 in Federal Reserve notes sitting at his house?

I never said saving was bad for the economy. I said hoarding was bad. If you invest the saving, then that is very good for the economy. If you put the savings in a bank, then they loan it to someone to invest... good for the economy. Putting money in a shoe box under your bed is bad for the economy.

The only hoarder is the one putting it in a shoe box. The rest invested in business and or loans (bank deposits are a loan to a bank) to people, which all generates income for those savers. That income should be greater than inflation over the long term, so they don't get the inflation tax on their savings. The investment income was the offset. Labor that is needed for the economy will have its wage grow with or faster than inflation, so they aren't taxed by inflation either.

Those taxed by inflation are those that didn't invest savings, but just held it in cash under the bed. Those that are in jobs that aren't in high demand from the economy are taxed through inflation, which hopefully pushes them into jobs that are needed to be filled.

The big picture economy isn't the same as your personal finance. The big picture economy wants to produce as many goods/service as possible at the lowest cost, match consumers with those goods/services. People and assets being idle is not good, since it means we produce less than we could.

If we need 8 factory workers and 6 nurses, but we have 10 factory workers and 4 nurses.... we need the factory workers wages to drop/nurse wage to increase to push two factory workers to get trained as nurses. Small picture this seems really bad to the factory worker, but big picture is very bad for us to have overages here and shortages there.

I do think we way over consume. We aren't producing an equal amount of consumption. The developing world is welling to take paper dollars for the short fall. I have a feeling that they will end up getting less goods than they received long term---and they know it. They are willing to do this because they want to produce jobs for their country now to build their economy. Consider it a big picture loss leader for them. It will stop as soon as they are developed.

We did the same thing, but people don't think about it. We took jobs from Europe when we were starting out. Europe is still over there. They haven't gone bust yet. We ended up doing it better and they ended up doing better. The same will happen again. Everyone will be better off (big picture as there will be some losers if you point out actual people).


Congress is still the one issuing money. The federal reserve is only a tool to spread out inflation over time. I think people really misunderstand the federal reserve. All the federal reserve does is change U.S. treasuries into Federal reserve notes. They do this to spread out inflation over time. The fall of the dollar can be traced back to the increase in the national debt. The national debt has almost double since 2000, and the dollar has almost been cut in half. Big business and wealth people keep most of their cash in money markets. A money market is a fund that invest in liquid investment, and most of those investment are in U.S. Treasuries. Those people view that money market as cash (even accounting treatment for corporations consider it cash). It really isn't cash... it is U.S. government debt. Then again, those federal reserve notes are backed by U.S. government debt too, so many it is cash. Also, the Federal Reserve Bank is a government entity. All profits from the Federal Reserve go to the U.S. Treasury. The problem is Congress borrowing to much money.

You want to know how much inflation the U.S. Federal Reserve has protected the U.S. population from? Consider this.. U.S. treasuries owned by the Federal Reserve is around $900,000,000,000. U.S. Treasuries owned by other parties is around $8,600,000,000,000. If Congress stopped borrowing now, then it would still take the Federal Reserve around 38 years to own all the debt with them growing the supply of notes at 6% a year.

The system has changed a lot since 1913 with computers and current banking system. A lot of the inflation has already happened, since the shorter term debt is own in money markets (consider it cash like). Still there would still be inflation for awhile after the U.S. government stopped borrowing. I guess you could say the Federal Reserve was created to help congress hide their spending side affects.

The Gold standard was awful. It created bubbles and depressions. I agree the bubbles were smaller... many a lot smaller. The depressions were a lot worse though. Those depression happened about every 70 years or so. We are pass due on the 2000s depression, unless is going to happen soon. The liquidity crunches from the Gold standard don't exist anymore. The standard of living has greatly increased since 1913. Why do we want to go back to an era of low real growth?

-SFWUSC

-SFWUSC

The Federal Reserve bank is not a private corporation.

Who owns the Federal Reserve?

The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

How is the Federal Reserve funded?

The Federal Reserve's income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate). After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.


Ok, so profits go to U.S. Treasury and they answer to Congress. Sound like being owned by the Government to me. Plus the governors are appointed by the President and confirmed by the senate. They can do what they want without getting approval, but one ticked off Congress and President --- repealing Federal Reserve Act can make it all go away.

Wages of the low skill jobs don't keep up with inflation. I agree with that and didn't say they did. We don't have enough people with skills for higher paying jobs, but they lack the skills to get them. I heard 1/3 of people drop out of high school. They will never have anything. It is their fault, not the governments. The government offered to educate them through high school for free (or very low cost).

The Great Depression was under a gold standard...that wasn't a fiat currency caused depression. To give you an idea how bad the Great Depression could have been due to deflation... think about it this way.. there was around 1-2% deflation those 8-10 years even though FDR revalued the gold standard 20.67 to $34. That devaluing the dollar should have caused inflation, but deflationary force were to strong.

There as not been one depression under the current fiat currency. There have been problems yes. The stagflation in the 70s was under the fiat currency though I think out of that was due to the over spending under the gold standard in the last few years. There was way to many dollars vs the gold supply. The stock bubble crash worked out very well actually. Those that made poor investments loss tons of money, but the system didn't crash into a depression. That is even consider the late 90s vs 20s stock market was greatly more overvalued. We have yet to have a depression from the real estate/credit bubbles. People will lose money from poor real estate purchases and poor underwriting standards, but the system hasn't crashed.

I don't think the current system is perfect, but the gold standard wasn't either.

http://www.federalreserve.gov/gener...q/faqfrs.htm

-SFWUSC

Yes, I've heard the "independent within the government" line before. Sounds like the President huh? And yes, the Congress could repeal the Act, but why would they? Paying for trillion dollar wars, social programs, and pet projects would be just a tad harder without the ease in which the bills of credit float around Washington. And besides, if two canditates run for office and one is pro-FED and one is anti-FED, who do you think 9 times out of ten raised the most campaign funding? The Federal government and the Federal Reserve are simply "in bed together". The system is good for both of them.

As to the legality of the Central Bank, which their website seems to mention quite a few times, any bill/law that is out of whack with the Constitution is void and itself illegal. It does not matter if the law is a good and effective one (which it usually isn't). No act of Congress, order from the President, or decision by the courts can violate the Constitution.




Only the Congress has this power. No one else, an individual or a corporation, can claim this power. The Congress also does not have the power to push this awesome responsibility onto another. It matters not how effective, or ineffective, another might be with the power, Congress alone coins money in these united states.

Booms and busts are created in this system. They bring havoc to the masses but profits to those aware of the scheme.

From 1914-1919 the FED increased the money supply by almost 100%. Loans to smaller banks, and by extension, to the people were common and easy to come by. In 1920 the fed called in a huge number of their loans to the small banks. The small banks then called in their loans to "pay the piper". The result: bank runs, bank closure, and financial run. More than 5000 banks outside the Federal Reserve System collapased.

From 1921-1929 once again the money supply was increased, this time by over 60%. Same as before, loans were being granted left and right. The infamous Margin Loans made their last stand here. Bascially, Margin Loans allow the investor to put down 10% of the cost of a stock with the bank paying the other 90%. The investor had 100% control of the stock. You purchase $1000 worth of stock but only pay $100. Not a bad deal. However....these loans can be called in at anytime for anyreason and had to be paid within 24 hours. No biggie--just sell your stock and pay the loan. Enter the Bankers. They all decide to leave the Stock Market in late summer/early fall 1929. Late October '29, mass amounts of Margin Loans are called in. Panic once again breaks out among the massess--bank runs, stock fire-sales, and collapse...16,000 independent banks go under. THe Rockerfellers and friends then buy up tons of stock (and sometimes entire corportations) at ridiculously low prices. The FED goes on to reduce the money supply further which turned the Panic of 1929 into the Great Depression. Oh, I almost forgot, they then go on to forcibly steal all the gold in the nation, trying to "end" the depression that had purposly caused for their own greedy ends. And don't think they never did it again--things liek this have happened many, many times since...they took out Bear Sterns just a few weeks ago!


But, I suppose we're both right in our own ways. You outline the clean, professional image the Federal Reserve just loves to project. I highlighted just a few of their darkest secerts--there are plenty more I can assure you.

If you truely want to reign in the Congress' spending habits, the Fed must go. Traditionally, the gov't got most of their funding through tariffs, which keep their spending low and waste was nearly unheard of. Nowadays, a bridge-to-no-where here and a steal-from-the-middle-class-give-to-the-lower-class-while-protecting-our-own-butts there and we've got our selves a congress! lol too many -'s I know. The point is, the two feed off each other. One must go before the other can be controlled....and I'd much prefer to see the Congress stick around for at least a few hundred more years

--gary



OH, in the 5th paragraph of my last post I mispoke--it was the Panic of 1907, not 1913, that I was referring to.

I'm not sure why one would be opposed to a composition change. I just get that impression from reading this thread. I personally think its a good idea.

XavierOfGreen,

You are right. Much of our money is someone else debt. Gold standard didn't change that fact. A lot of the money was debt until Nixon took us off the gold standard (we didn't have enough gold to redeem all the notes). In the 1920s there was a lot of debt and wealth affect creating money.

There is no perfect standard of money. We are lucky in the fact you can always just buy gold with extra currency, invest it in a business, buy extra household goods, or whatever. Leaving it in cash is going to cost you due to inflation, but it is your choice to leave it in cash.

-SWUSC

GFR3-

Jefferson was accurate. Fiat currencies always end in disaster for someone; usually the great majority of people of the country. History repeats itself while human nature remains the same. Inflation is accelerating. I can think of no metal that small denominations could be made of that will be worth less than the cost of production, at least in our currency. Interesting times indeed! Be prepared my friends, and strengthen the things that remain.