Saving Capitalism from Capitalists.... | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

saving a thread 3 replies

Shortcuts and other time saving tips 3 replies

Saving Capitalism from Capitalists....

  • #21
  • Edited 1:16pm Sep 29, 2009 1:13pm | Edited 1:16pm
Thanks for the Laissez Faire recommendation guys, really interesting reading.

Something that I cant get my head around is the following, which is found at this website.... http://mises.org/story/3165

"Government Intervention Actually Responsible for the Crisis

Beyond all this is the further fact that the actual responsibility for our financial crisis lies precisely with massive government intervention, above all the intervention of the Federal Reserve System in attempting to create capital out of thin air, in the belief that the mere creation of money and its being made available in the loan market is a substitute for capital created by producing and saving. This is a policy it has pursued since its founding, but with exceptional vigor since 2001, in its efforts to overcome the collapse of the stock market bubble whose creation it had previously inspired. "

Now..... A Laissez Faire approach to economics means that Government role in the economy is minimal, which is obviously not the current economic landscape. But the FED is actually a Private (non-gov) organization, so how can {In the linked article}the blame be placed on the Government as a defense for Laissez Faire?
Living the adventure in my head.
  • #22
  • Sep 29, 2009 1:29pm Sep 29, 2009 1:29pm
It seems there is a point where Private business's are so entwined in the economy that they may as well be Public. Motives become blurred, and their problems become the problem of the economy at large and thats when Gov-Interventions take place.

I'm confused again, are these gov interventions or Privately owned fed interventions? Does the Gov just hand over tax money to the fed to fund these things?
Living the adventure in my head.
  • #23
  • Sep 29, 2009 1:48pm Sep 29, 2009 1:48pm
Quoting Leonlorenzo
But the FED is actually a Private (non-gov) organization, so how can {In the linked article}the blame be placed on the Government as a defense for Laissez Faire?
Congress is constitutionally mandated to decide monetary policy and control the nations money supply. It abdicated its responsibility by passing the Federal Reserve Act which was then signed in to law by President Woodrow Wilson in 1913.
  • #24
  • Sep 29, 2009 2:00pm Sep 29, 2009 2:00pm
Quoting opie999
Congress is constitutionally mandated to decide monetary policy and control the nations money supply. It abdicated its responsibility by passing the Federal Reserve Act which was then signed in to law by President Woodrow Wilson in 1913.
So your saying that the existence of the FED and its purpose is against the constitution?

But still, my point was that the article states that the current crisis is the fault of the Government, but the mistakes with regards to deposit requirements/lending within banks was the fault of the FED, which is privately owned. So that particular articles argument In defense of Laissez Faire is not well thought out.

I might be missing something though.
Living the adventure in my head.
  • #25
  • Sep 30, 2009 12:47am Sep 30, 2009 12:47am
Quoting Leonlorenzo
So your saying that the existence of the FED and its purpose is against the constitution?

But still, my point was that the article states that the current crisis is the fault of the Government, but the mistakes with regards to deposit requirements/lending within banks was the fault of the FED, which is privately owned. So that particular articles argument In defense of Laissez Faire is not well thought out.

I might be missing something though.
when it walks like a duck, talks like a duck, ....

it doesn't matter if intervention is public or privat, its still intervention.

lets say i give you 100K to trade and i want 3% interest, and i say to you, if you lose it all, i'll give you another 100K, this time i want only 2%, would you trade like it was your money? would you hire managers, who take high risks and give them a lot of money, so to motivate them to make a killing out of your 100K? or would you play it conservativ?
but what if i give 20 people 100K, and other people, who want to participate, go to the man with the highest gain and give them their money, so you could make 100 fold if you attract enough, would you still play it conservative?
btw the money i gave you, is financed by taxes

and thats only an example of insurance

setting the ir, is fixing the price of money, thats a big one, government or fed, doesnt matter.
Invincibility lies in the defence, the possibility of victory in the attack
  • #26
  • Sep 30, 2009 12:58pm Sep 30, 2009 12:58pm
Quoting silverheat

setting the ir, is fixing the price of money, thats a big one, government or fed, doesnt matter.
It does in regards to my point.

The article I quoted was defending Laissez Faire, as it was being blamed for the current problems in the US. The author says that its economic principles(IE, Let the market decide) are not being used in the US, and therefore the current crisis could not be the fault of the Laissez approach. They then go on to say that the smoking gun is in the hands of the government/FED through their over leveraging and risk taking..... but the FED IS a private corporation, so how can the Gov be to blame?

Something I cant understand is how a private corp can be allowed to exert such power over a country and its people. The usefulness of a free market comes from competition, who is the FEDs competition?

And yes, I definitely agree with you about Gov bailouts, its certain that they will cause inefficiency by planting the seed of invincibility in CEO's minds.
Living the adventure in my head.
  • #27
  • Sep 30, 2009 1:24pm Sep 30, 2009 1:24pm
Laissez Faire economics is fine, but it ends with banks. Banking is not a subject that can or should be left to pure market forces due to the mechanics of its operation. Banking NEEDS regulation and a central bank to act as lender of last resort. The alternative would be inevitable, catastrophic, bank failures at the end of every business cycle.

We can all bitch about the current state of affairs, and some of the blame does go to the Fed, but it would be beyond foolish to assume that we would be at all better off without it.
  • #28
  • Sep 30, 2009 1:46pm Sep 30, 2009 1:46pm
Quoting Darkstar
Banking NEEDS regulation and a central bank to act as lender of last resort. The alternative would be inevitable, catastrophic, bank failures at the end of every business cycle.
we already have bank failures

http://www.fdic.gov/bank/individual/.../banklist.html
http://www.calculatorplus.com/saving...led_banks.html
Invincibility lies in the defence, the possibility of victory in the attack
  • #29
  • Sep 30, 2009 2:01pm Sep 30, 2009 2:01pm
Quoting Darkstar
Laissez Faire economics is fine, but it ends with banks. Banking is not a subject that can or should be left to pure market forces due to the mechanics of its operation. Banking NEEDS regulation and a central bank to act as lender of last resort. The alternative would be inevitable, catastrophic, bank failures at the end of every business cycle.

We can all bitch about the current state of affairs, and some of the blame does go to the Fed, but it would be beyond foolish to assume that we would be at all better off without it.
The Federal reserve bails out {Insert a name} by using tax payer money with conditions for repayment. So I assume the US treasury gives the FED the American peoples tax money, which they (the fed) are then paid back with interest over time. If the FED is getting bailout money by way of tax revenues, how on earth can it be Private? We hear that the Gov and therefore our Per capita Debt is rising but to whom do we owe this debt? Surely not the banks that are using the peoples tax money and receiving interest on it.

I'm not understanding something here.

EDIT: Maybe I need to read up on the Fed payment plan back to the US Gov/treasury........ inc. interest.
Living the adventure in my head.
  • #30
  • Sep 30, 2009 2:13pm Sep 30, 2009 2:13pm
Quoting Leonlorenzo
..... but the FED IS a private corporation, so how can the Gov be to blame?
so i can come and open up a central bank, make my own currency, compete against the fed? no.

why, the government gave its power to the fed, it can take it away

http://en.wikipedia.org/wiki/Fed#Cen..._United_States

In early 1781 the Articles of Confederation & Perpetual Union were ratified so that Congress had the power to emit bills of credit. It passed later that year an ordinance to incorporate a privately subscribed national bank following in the footsteps of the Bank of England. However, it was thwarted in fulfilling its intended role as a nationwide central bank due to objections of "alarming foreign influence and fictitious credit," favoritism to foreigners and unfair competition against less corrupt state banks issuing their own notes, such that Pennsylvania's legislature repealed its charter to operate within the Commonwealth in 1785.
Four years after the U.S. constitution was ratified, the government adopted another central bank, the First Bank of the United States, but it would ultimately be shut down by President Madison. The Second Bank of the United States, i.e. the second central bank, met a similar fate when its charter expired under President Jackson. Both banks were, again, based upon the Bank of England[10], but the increased Federal power, due to the constitution, gave them more control over currency. Political opposition to central banking was the primary reason for shutting down the banks, but there was also a considerable amount of corruption in the second central bank. Ultimately, the third national bank was established in 1913 and still exists to this day. The time line of central banking in the United States is as follows:[11][12][13]
Invincibility lies in the defence, the possibility of victory in the attack
  • #31
  • Sep 30, 2009 4:13pm Sep 30, 2009 4:13pm
Quoting silverheat
so i can come and open up a central bank, make my own currency, compete against the fed? no.

why, the government gave its power to the fed, it can take it away
Yes.

It's just an odd relationship in my eyes. A private corporation that receives money from the Government for bailouts of other businesses. I see no reason why a central bank can/should not be Public. Why cant the treasury do the bailing out directly instead of playing pass the parcel.
Living the adventure in my head.
  • #32
  • Sep 30, 2009 4:32pm Sep 30, 2009 4:32pm
Quoting Leonlorenzo
A private corporation that receives money from the Government for bailouts of other businesses. I see no reason why a central bank can/should not be Public. Why cant the treasury do the bailing out directly instead of playing pass the parcel.
The Federal Reserve can not, has not, and will not ever receive funding from the US Government. To say othewise indicates a lack of fundamental understanding of the subject.
  • #33
  • Edited 5:05pm Sep 30, 2009 4:50pm | Edited 5:05pm
Quoting Darkstar
The Federal Reserve can not, has not, and will not ever receive funding from the US Government. To say othewise indicates a lack of fundamental understanding of the subject.
I don't know, or think I know anything until I read it or am told it.

The heading on this site about AIG and their Bailout, says as such ..."AIG Bailout: $85B in Loans, 80% AIG Taxpayer Owned", Yet the Bailout of AIG is credited to the FED in places such as this where they clearly state "Federal Reserve rescues AIG".

How can AIG have been bailed out by the Federal Reserve but be 80% owned by the taxpayer?

It's still early days, plenty of time to learn. In fact, gaining understanding was the very reason I started this thread, just like every other one Ive opened.
Living the adventure in my head.
  • #34
  • Sep 30, 2009 5:13pm Sep 30, 2009 5:13pm
Quoting Leonlorenzo
I don't know, or think I know anything until I read it or am told it.

The heading on this site about AIG and their Bailout, says as such ..."AIG Bailout: $85B in Loans, 80% AIG Taxpayer Owned", Yet the Bailout of AIG is credited to the FED in places such as this where they clearly state "Federal Reserve rescues AIG".

How can AIG have been bailed out by the Federal Reserve...
Maybe I'm misunderstanding. Did the FED lend money to the tax payer/GOV to nationalize AIG? If so, that makes sense, besides the fact that I'm seeing conflicting figures about AIG ownership. Some sources state that it is 80% taxpayer owned while others 80% FED owned as a condition of the Loan.
Living the adventure in my head.
  • #35
  • Sep 30, 2009 5:23pm Sep 30, 2009 5:23pm
Quoting Leonlorenzo
Maybe I'm misunderstanding. Did the FED lend money to the tax payer/GOV to nationalize AIG? If so, that makes sense, besides the fact that I'm seeing conflicting figures about AIG ownership. Some sources state that it is 80% taxpayer owned while others 80% FED owned as a condition of the Loan.
That is the correct line of thought. The government borrows it's money from the fed and then passes it down as it needs to.

Edit: Needed to clarify the fact that the government's money is borrowed from the fed, not given of freely.
  • #36
  • Sep 30, 2009 5:26pm Sep 30, 2009 5:26pm
The media tends to dumb things down for the masses.

AIG and the rest of the bailout recipients received funding from general tax revenues through the TARP program. If you look back it was Hank Paulson on his knees begging for the TARP money in congress, not Ben Benanke. When it was approved, Treasury took some of the money they have in the checking account (which is at the Fed) and wrote a check to AIG etc in exchange for stock/bonds/warrants/etc. Those assets are now owned by the United States Government.

The Fed is a key banking system regulator and as such has unparralleled access to aggregate banking system information. If you look back through history, they are always orchastrating the aversion of calamity in times of potential systemic risk, so naturally they were on point here as well. The banks were telling Treasury that if they didnt get money the banking system was going to collapse. The Fed corroborated the risk assessment and then Paulson went to congress for the loot.

If the Fed said the bankers were blowing smoke, Paulson would not have gone to congress and AIG would have failed. So one could say that the Federal Reserve "rescued" AIG and be materially honest if not technically factual.

Sorry if I came off snarky. I had the impression this was another "Fed is evil" conspiracy theory thread. When I see them I go into attack mode. I'd be happy to answer any serious questions one has regarding the Fed.
  • #37
  • Sep 30, 2009 5:35pm Sep 30, 2009 5:35pm
I think your confusion stems from the fact that FED is privately owned. That may be true, but it's a mere accident of history which has no influence on how the reserve system is run. It was created by the state and is being run by the state despite it's private ownership. This is by design (and law). The reason for private ownership was probably to ensure some level of independence from government (it's always too tempting for government to inflate the monetary supply by printing money). For the same reason European central banks are formally "independent" from government by the act of law, but the power structure is the same as in USA. At the end of the day it's the government who says what the central bank will do and not the other way. Which means that it's the government, who is responsible for bailouts, and it's the government, who co-owns the bailed out companies.

Sorry for my English, I hope it's clear enough.

As for reading recommendations, like many others I would recommend Mises, Human Action, or some other Austrian literature, unfortunately the are the only once who understand capitalism.
  • #38
  • Sep 30, 2009 5:36pm Sep 30, 2009 5:36pm
Quoting Skyhook
That is the correct line of thought. The government gets it's money from the fed and then passes it down as it needs to.
Yep, i sore FED bailout + Taxpayer money and came out with things the wrong way round. Fed lends the gov Dollars for bailout sounds much more sane.

You learn something every day. Wish someone would have told me earlier though so I didn't make a fool out of myself.
Living the adventure in my head.
  • #39
  • Edited 5:57pm Sep 30, 2009 5:50pm | Edited 5:57pm
Quoting Skyhook
That is the correct line of thought. The government borrows it's money from the fed and then passes it down as it needs to.
Technically the Fed isn't allowed to loan money directly to the Government. The government can only issue treasury bills/notes, which are sold into the open market. The Fed can use money on deposit (from the member banks) to purchase the notes/bills from the open market to manipulate the interest rates, but only after someone else has made the original loan. There are many clearly defined laws that seperate the Fed from the US Government.
  • #40
  • Sep 30, 2009 5:55pm Sep 30, 2009 5:55pm
Quoting Darkstar
Technically the Fed isn't allowed to loan money directly to the Government. The government can only issue treasury bills/notes, which are sold into the open market. The Fed can use money on deposit (from the member banks) to purchase the notes/bills from the open market to manipulate the interest rates, but only after someone else has made the original loan. There are many clearly defined laws that seperate the Fed from the US Government.
Yes, if Fed as government run institution was allowed to lend money directly to government, it would be roughly the same as moving money printing presses from Fed to White House. They would take them down only for necessary maintenance.
0 traders viewing now