Obviously there is room for improvement. Not really sure what those improvements would be entail though. At present it seems much like the FDA in that the fox is guarding the hen house.
For those who would advocate for it’s abolishment what do you suggest as its replacement?
Currently all interbank checks are cleared through the Fed. How would this be facilitated in its absence? In its absence would each bank then have to set up a system to clear every other bank in the United States? What about overseas transactions? How would those be cleared?
How would individual banks be monitored? At present the Fed monitors every bank in the United States. This is but one way liquidity is maintained. They are responsible for shutting down banks before customers funds are lost do to mismanagement. Absent the Fed what agency do we create to do this?
Of course the Fed also sets interest rates. In its absence how would rates be set? Certainly not by Congress. They can’t even pass a budget. Does anyone seriously think they could agree on interest rates? Article One clearly states “ but all Duties, Imposts and Excises shall be uniform throughout the United States;”. What about the President as Trump has advocated? Do we have want someone who is fiscally irresponsible to set a corresponding interest rate to mitigate the effects of bad policy decisions?
Those are but three functions the Fed performs. What about the many more? What inefficient bureaucracies would we create to replace the Fed?
I’ll be the first to admit the Federal Reserve system is flawed. But it makes much more sense to fix what can be fixed than to throw the baby out with the bath water and bring great instability to the economy.
Abrignac wrote:
What to replace it with? When you have cancer removed, what do you replace it with?
Immediate proposals for improvement
The FED should be audited by independent auditors
The FED should abolish closed door secret meetings and video every meeting and release transcript to media and public
The FED should sell off all government debt and close the discount window which would force banks to compete in the market for interest rates. This would be the “true” cost of money that more realistically indicates risk environment. That’s where and how the interest rate would be set. The government doesn’t need to artificially set the rate. This is private enterprise and not the purview of duties, excise, etc..
The FED should sell off its balance sheet. Why does the government own mortgages and corporate paper? This trifling interferes with the natural modulation of free markets and contributes to boom / bust redistribution of money and it favors the wealthy
The FED didn’t insure the largest banks in our country which produced “too big to fail “ crises Lehman, etc, this is a structural hazard to our economy while at the same time the FED insurance that now covers the largest institutions encourages unlimited risk taking by large banks who otherwise would guard against insolvency, restrict loans to qualified consumers, increase deposits and create efficient and self-regulating banks because they don’t want to face the consequences of bank failures. They’d have more skin in the game. This is an example of how the government tried to fix something but unintentionally increased the risk. This is one reason the FED should be abolished. Banks that fail will be bought by other banks. Deposits up to a nominal amount, $250K or $500K or whatever can be easily figured out by requiring banks to have insurance on domestic and household accounts.
- these are just a few thoughts on the criticisms I have for the FED. Difficult to fully express ideas on a cigar forum but I think you get some of my ideas from this. These aren’t all the answers and I don’t have all the answers, and be sure of that! lol. Just offering discussion.
Edited by user
2 years ago |
Reason: Not specified
