The credit crunch...Debt and the federal reserve

Re: credit crunch/recession

Danish Blue said:
whether you are right or wrong scrapping the national bank wouldnt have changed the outcome. The central banks have been given the sole remit over the past 20 years of meeting inflationary and or money supply targets. They have been told not to worry themselves with such matters as the housing market or unemployment. As a result they have raised interest rates on many occasions to meet the inflation targets when politicians would never have done so as it lead to job losses which is unpopular with the electorate. At the end of the day someone has to set the interest rate and central banks with their inflation targets are more likely to keep rates higher than any politician whose main aim is to get reelected
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Politician's? Try the Market.

I agree Politicians determining rates would be bad - but the other side of that coin is.... atleast they are elected by us, therefore answer to us.

Interest rates are simply the price of money. Currently, these rates are set by the Central Bank. Without the Central Bank, they would be set by the market. They already are, to some degree. If you have a bad credit rating, you will have to pay a higher rate, because you are more of a risk. The main problem is that the Central Bank makes too much or too little credit available at any given time, so the market doesn't know how to properly respond, and wealth gets wasted.

Seeing how the Central Bank is setup to manipulate interest rates, and artificial (low) interest rates is what has caused this crisis, then yes, I believe it would have changed the outcome if they weren't around to do so.

I am not saying that a free market backed currency would be all heavenly BTW, but it wouldn't be as nearly as bad as the effects of our current fiat currency and central economic planning.
 
Re: credit crunch/recession

perfect economics would be easy if you could remove the human element, eh.

doesnt matter who controls the interest rate and money supply there will always be the risk of human error. handing it over to a computer won't solve that, someone has to set the bloody rules.

greed, i tell thee, greed, will always lead some people (investors, consumers, policy makers, bankers, traders, and speculators are all succeptible) to ignore the warning signs or act without regard to the long term, distort the market, and there will always have to be a correction, and it will never be painless. the collapse of lehman, the situation with fannie and freddie will teach everybody a lesson, then, after a few years steady growth, people will start to feel invulnerable again and it'll all happen again.
 
Re: credit crunch/recession

bizzbo said:
perfect economics would be easy if you could remove the human element, eh.

doesnt matter who controls the interest rate and money supply there will always be the risk of human error. handing it over to a computer won't solve that, someone has to set the bloody rules.

greed, i tell thee, greed, will always lead some people (investors, consumers, policy makers, bankers, traders, and speculators are all succeptible) to ignore the warning signs or act without regard to the long term, distort the market, and there will always have to be a correction, and it will never be painless. the collapse of lehman, the situation with fannie and freddie will teach everybody a lesson, then, after a few years steady growth, people will start to feel invulnerable again and it'll all happen again.
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Yes, and that is why centralised economic planning is crazy. If it is mismanaged everyone suffers - shit, this thing is global. If we had true de-centralized, free markets , only those that made bad decisions would suffer.

My point about a computer was to have the (fiat)money supply steadily increase by 2% and leave it be, no matter what. Still, fiat money will always kill the currency as it is too tempting to just print what you need/want whilst bundling the cost on future generations.
 
Re: credit crunch/recession

ElanJo said:
Danish Blue said:
whether you are right or wrong scrapping the national bank wouldnt have changed the outcome. The central banks have been given the sole remit over the past 20 years of meeting inflationary and or money supply targets. They have been told not to worry themselves with such matters as the housing market or unemployment. As a result they have raised interest rates on many occasions to meet the inflation targets when politicians would never have done so as it lead to job losses which is unpopular with the electorate. At the end of the day someone has to set the interest rate and central banks with their inflation targets are more likely to keep rates higher than any politician whose main aim is to get reelected
Click to expand...

Politician's? Try the Market.

I agree Politicians determining rates would be bad - but the other side of that coin is.... atleast they are elected by us, therefore answer to us.

Interest rates are simply the price of money. Currently, these rates are set by the Central Bank. Without the Central Bank, they would be set by the market. They already are, to some degree. If you have a bad credit rating, you will have to pay a higher rate, because you are more of a risk. The main problem is that the Central Bank makes too much or too little credit available at any given time, so the market doesn't know how to properly respond, and wealth gets wasted.

Seeing how the Central Bank is setup to manipulate interest rates, and artificial (low) interest rates is what has caused this crisis, then yes, I believe it would have changed the outcome if they weren't around to do so.

I am not saying that a free market backed currency would be all heavenly BTW, but it wouldn't be as nearly as bad as the effects of our current fiat currency and central economic planning.
Click to expand...


The market is setting interest rates so i think that argument falls down aswell. The central bank rate bears no relation on where people can borrow money as there is a credit spread which the lending institution add on to the central bank rate which is its insurance against bad debt. The free market sets this rate or if you will "the invisiable hand", it has shown itself to be incapable of doing this in an efficient way. Hence the death of capitalism in the form we knew it in the 80s and 90s. The central banks are pumping cash into the system at present to try and restore the link but to no avail at present as the credit market remains locked.

As an example of the inefficiency of free markets, in the year prior to the credit crisis around 4 pct of mortgages in the US were made with the lenders fully knowing that the borrower would not even make the first payment. They dont care though because they take that loan and wrap it up in a package and sell it to someone else.

The central banks cant really be blamed for doing what they were asked to do which was meet inflation targets. I think the problem was theat they should have been instructed to monitor a wider range of variables. Besides that there has been a lack of transparency in financial markets which must be addressed along with better regulation.
 
For anyone interested in this....and we all should be.... this is a fascinating film about the Fed and who owns it and what it means to the yanks and the world

<a class="postlink" href="http://uk.youtube.com/watch?v=_dmPchuXIXQ" onclick="window.open(this.href);return false;" target="_blank">http://uk.youtube.com/watch?v=_dmPchuXIXQ</a>
 
It is a fascinating film I watched it a few years ago and in light of recent events thought I would watch it again, I must admit I am a bit of a conspiracy nut but a lot of the points do make sense especially as the banks are looking to offload their bad debts on to the suckers in the good ole US of A.

Another fascinating documentary is <a class="postlink" href="http://uk.youtube.com/watch?v=7E3oIbO0AWE" onclick="window.open(this.href);return false;" target="_blank">http://uk.youtube.com/watch?v=7E3oIbO0AWE</a> about 9/11 which address's some similar themes
 
barcabloo said:
It is a fascinating film I watched it a few years ago and in light of recent events thought I would watch it again, I must admit I am a bit of a conspiracy nut but a lot of the points do make sense especially as the banks are looking to offload their bad debts on to the suckers in the good ole US of A.

Another fascinating documentary is <a class="postlink" href="http://uk.youtube.com/watch?v=7E3oIbO0AWE" onclick="window.open(this.href);return false;" target="_blank">http://uk.youtube.com/watch?v=7E3oIbO0AWE</a> about 9/11 which address's some similar themes
Click to expand...

I've see that Barca, interesting stuff. If you a are a conspiracy nut then you HAVE to check out the one I just posted, you will certainly dig it.
 
It's interesting. I've had conversations about the one world government 'conspiracy' before, but this kind of gives it's roots. Like you barca, I like reading about conspiracy's, but most of them would actually tie into this one big one if you think about it.

Enjoyed it, and you've set me off looking for similar video's. Thanks ;-P
 
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