[Throatpoker]

Originally Posted by GermanBJJ

I think there is a fundamental misunderstanding of what, at base, the Fed is designed to do. The Fed is not designed to stop all recessions, to stop all crashes, to stop all bubbles, etc. There isn't one central banker that will say the Fed has that power. No organization can be designed that can do that. The point of the Fed is to make the crashes, recessions, depressions less serve and to control the supply of money to help create economic growth and stability.

I've seen America: Freedom to Fascism, and read A LOT of stuff on The Fed, so it's safe to say that I'm really uncomfortable with the fact that we have a cartel of private banks (with no say and power from the citizens) run have such enormous power, and enforce measures that are horribly unconstitutional, especially since all they've done is use that power to constantly devalue our currency in order to fund war endeavors, big government, and socialist models.

People have difficulty wrapping their heads around alternative outcomes of situations. For example, if there was no Fed, there is a good chance the recent credit market seizure would have yanked down the banking system something awful. Something like we haven't seen in 80 years.

Don't you think that the Fed's inflationary actions have had something to do with this whole mess? Through lower and lower interest rates, doesn't that motivate the local banks to take risks with those they lend money to? Also, shouldn't this job be done by Congress altogether?

But the Fed stepped in and prevented that. The free-market wouldn't have prevented it. The government wouldn't have prevented it. People think that because markets are unstable then that means the Fed has failed. That's simply not true. Free-markets, by their nature, will naturally become unstable. The Fed's job is to try to take the edge off of that instability and make it sure it doesn't cause a collapse.

I personally believe that business cycles come because of government interventions, free markets do not reward taking too much risks, when the fed implements keynesian "pillows" in order to protect assets those bankers consider "essential" to the economy, they in turn encourage more risky behavior from other elements (Bear-Stearnes).

So does the Fed work? Yes, it does. That's a fact. That's why almost every major economist in the world supports the Fed as an institution.

I have a feeling that most of those economists are "neoclassical", if not straight socialists. Nowadays, mainstream economics taught in campuses encourage a very relativist view toward the study, so for some reason the experts don't acknowledge the direct relationship between the inflationary foundations of the Fed, and the current crisis we're seeing.

You can pull out Thomas Jefferson quotes, or Mises quotes or Ron Paul quotes or whoever you want.

But you need to realize the people you keep quoting have no real current economic credibility whatsoever. And if you want to let individuals without any real economic credibility design an economy, be my guest. But don't do it in the country that I live. I don't feel like waiting in line at a soup kitchen any time soon.

Well, Mises has been dead for quite a while now, but the man pretty much predicted the woes we're facing, so as a professional economist, whose teachings inspired Nobel prize-winning economist F.A. Hayek, then the man could be considered to have had current economic credibility (even for today's standards and specifics). On the other hand, as member of the Joint Economic Committee, the Committee on Financial Services, and having formerly served on the House Banking Committee, it's safe to say that the man knows what he's talking about, especially since he has been an avid student of economics.