I'm interested in hearing views about the Fed from all. I've heard many conspiracies over the years, and a lot of strong sentiment about it. I have only recently been reading the history of it, but would like to gain a better understanding. This thread is both for that and for general discussion.
Do they have too much power? Is it necessary to have a central bank? What the hell is the Fed, anyway? Etc. — Xtrix
Recent events have proved that the paper-money system of this country may be used as an engine to undermine your free institutions, and that those who desire to engross all power in the hands of the few and to govern by corruption or force are aware of its power and prepared to employ it. Your banks now furnish your only circulating medium, and money is plenty or scarce according to the quantity of notes issued by them. While they have capitals not greatly disproportioned to each other, they are competitors in business, and no one of them can exercise dominion over the rest; and although in the present state of the currency these banks may and do operate injuriously upon the habits of business, the pecuniary concerns, and the moral tone of society, yet, from their number and dispersed situation, they can not combine for the purposes of political influence, and whatever may be the dispositions of some of them their power of mischief must necessarily be confined to a narrow space and felt only in their immediate neighborhoods.
But when the charter for the Bank of the United States was obtained from Congress it perfected the schemes of the paper system and gave to its advocates the position they have struggled to obtain from the commencement of the Federal Government to the present hour. The immense capital and peculiar privileges bestowed upon it enabled it to exercise despotic sway over the other banks in every part of the country. From its superior strength it could seriously injure, if not destroy, the business of any one of them which might incur its resentment; and it openly claimed for itself the power of regulating the currency throughout the United States. In other words, it asserted (and it undoubtedly possessed) the power to make money plenty or scarce at its pleasure, at any time and in any quarter of the Union, by controlling the issues of other banks and permitting an expansion or compelling a general contraction of the circulating medium, according to its own will. The other banking institutions were sensible of its strength, and they soon generally became its obedient instruments, ready at all times to execute its mandates; and with the banks necessarily went also that numerous class of persons in our commercial cities who depend altogether on bank credits for their solvency and means of business, and who are therefore obliged, for their own safety, to propitiate the favor of the money power by distinguished zeal and devotion in its service. The result of the ill-advised legislation which established this great monopoly was to concentrate the whole moneyed power of the Union, with its boundless means of corruption and its numerous dependents, under the direction and command of one acknowledged head, thus organizing this particular interest as one body and securing to it unity and concert of action throughout the United States, and enabling it to bring forward upon any occasion its entire and undivided strength to support or defeat any measure of the Government. In the hands of this formidable power, thus perfectly organized, was also placed unlimited dominion over the amount of the circulating medium, giving it the power to regulate the value of property and the fruits of labor in every quarter of the Union, and to bestow prosperity or bring ruin upon any city or section of the country as might best comport with its own interest or policy.
This was spurred on, in part, by Frontline’s excellent program about the Fed.] — Xtrix
The real story is Bretton Woods and how the US agreed to fund the recovery of the post WW2 broken colonial empires by making the US dollar the world currency. — apokrisis
without the role of the dollar, the US could not live on issuing new debt as it has for decades now. — ssu
but I have no idea what interest rates, like is it the interest rate on a mortgage or credit card? — John McMannis
What role do you mean, more specifically? — Xtrix
Xtrix, it's the world's reserve currency. Below the situation from this year:But it isn’t the world currency. There are many currencies in the world even today, but certainly in the 40s before the Euro. — Xtrix
But it isn’t the world currency. There are many currencies in the world even today, but certainly in the 40s before the Euro. — Xtrix
As early as 1936, Harry Dexter White, who was then a little-known official at the Treasury Department, was planning precisely this sort of conference, with the aim of establishing the dollar as the global unit of account of the entire world, and, very importantly, eliminating the pound sterling as a rival.
They were thinking about how if we manage our financial aid to Britain carefully and control it tightly, we can get Britain through the war, but also simultaneously limit its room for maneuver in the postwar world. It was a conscious effort to force liquidation of the British empire after the war.
The United States offers the world a deal. We will establish a new institution, the IMF, which will provide you with short-term balance of payments support if you get into difficulties. In return for which you promise to forswear competitive devaluation, devaluing your currencies against the US dollar without our approval. The world said that's as good a deal as we’re going to get right now, and they took it.
We still mint the currency in which we issue our debt. We've been issuing quite a bit of it in recent years, and we sell it at tremendous prices. We don't have any great incentive to change the system. When we send a dollar to China for Chinese goods, it basically comes back to us in the form of a near-zero interest loan, which gets recycled through the U.S. financial system to create yet more credit, which we can use to buy more Chinese goods.
https://www.washingtonpost.com/news/wonk/wp/2013/03/14/how-a-soviet-spy-outmaneuvered-john-maynard-keynes-and-ensured-u-s-global-financial-dominance/
The deficit spending, which enables the US to spend way more than it gets (in taxes), enables it to fight perpetual wars in other continents. — ssu
If you buy and sell internationally, the deals are done in US dollars. — apokrisis
Yet that is a huge enabler.So when you say deficit spending enables wars, that’s not saying much— it also enables us to fund all kinds of things, good or bad. — Xtrix
The Fed’s role is mainly in monetary policy. — Xtrix
I think it’s the funds rate, or the interest rate of money the Fed lends to banks to cover a certain legal minimum (to prevent bank runs). Banks can also loan excess money to other banks who are low on funds, etc. This trickles down to the interest rates you and I can receive from banks for homes, cars, credit cards, etc. That’s my understanding— happy to be corrected. — Xtrix
Get involved in philosophical discussions about knowledge, truth, language, consciousness, science, politics, religion, logic and mathematics, art, history, and lots more. No ads, no clutter, and very little agreement — just fascinating conversations.