Forum Post: What are the Alternatives to the FED?
Posted 13 years ago on Oct. 19, 2011, 2:33 a.m. EST by sfsteve
(151)
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It is essential that there is a central bank due to the scale of modern society. If we ended the FED what would take its place? How could banks avoid shocks without the lender of last resort? The FED also regulates banking, what would provide that function?
We need the fed, but there has to be a limit on its' power. Since the Fed itself advises Congress on how to oversee it, there really is no check on Fed power, which is proportional to the amount of debt that exists in the economy. Unchecked, the Fed will cause the total debt to skyrocket forever. There needs to be another power that can create liquidity through some means other than debt manipulation, that can keep the Fed in check. Think of it as an anti-Fed. A constitutional amendment can create this power, and it's purpose would be to trigger debt destruction where it would have it's own infinite balance sheet that can purchase and destroy debt if certain limits are exceeded, such as total asset valuation exceeding money supply by 20X, or unemployment exceeding 10% (just examples). You can see that I would not even trigger it right now, but I think that just it's existence would be a stabilizing influence on the economy and markets. The Fed right now can do this and has done this, this is basically what QE is. The difference though is that the Fed is also charged with maintaining price stability, which makes the Fed too cautious to do enough to make a difference, which then causes the problems to drag on for much longer than they otherwise would have to.
If we have a monetary system, there is always the need for a source to print money. Ending the Fed wouldn't mean wiping it off the face off the Earth. I think many people on hee would agree the Fed should be absorbed by the Treasury so there is some oversight. At the moment, the Fed is a private bank and it's sole purpose is for profit. They also have a monopoly on lending money, at interest. Before the Fed, the Treasury lent money at zero interest for productive means. Now the Fed lends directly to banks, at interest and that interest tricles down. There is a lot about the Fed and we can talk for hours. If there are more unanswered questions, feel free to respond. So to answer your question in laymen terms, the Fed wouldn't be replaced, but would be held accountable for it's actions and under the jurisdiction of the Treasury. It would lend not to banks, but directly to businesses for production. Banking would not have the same regulation, but would have a differnet business model. Since they are not getting loans directly, they would have to focus more on receiving deposits and charging fees.
I agree it should become a part of the government, and, above all, it's books need to be opened so we can understand what they've done and why and judge them accordingly.
But I think the people who are calling for the end of the Fed are reactionaries who believe in some sort of bizarre mythology.
Lol, it's so true tha the Fed is not acting in out best interest, But, like you said, some people think there will be some Utopian society when the Fed ends. Ending the Fed ought to get rid of unfair taxation from inflation, but hardly "Utopia". Nevertheless, bringing the Fed into public hands has to be at the top of the list for OWS.
well what ever this chosen in the end, for Christ's sake make sure they can be audited