The Feds are Sane???

Alan Greenspans and the subsequent Feds low interest rate policy is to blame for the subprime crisis and the recession. That's why lenders were able to extend credit to people and businesses with too poor of financial abilities to pay the loans back as the economy collapsed. The low borrowing rates attracted multitiudes of customers as housing prices soared due to demand. Low interest rates allowed too many to take more risks. Market appreciated equity compounded the issue by making more easy credit available. Alan Greenspan and the Feds are responsible for starting and feeding the vicious cycle, not Wall Street.

Disagree - the Feds created the cheap money environment of exessive debt which created the asset bubble. Banks were pressured to lend, corruption followed. Is Congress addressing any real reform? No, because like the public option in health care, democrats are determined not to fix the problem but tax the problem.
Some of the situations could be fixed just by raising the capital requiremnts of banks.

The board of governors is comprised of the heads of smaller reserve banks. There's one here in Phoenix, in fact. So? This alone doesn't validate the FED's existence or its actions.

I'm not really a "Ron Paul faithful"-I just happen to agree with him on this issue. I consider myself an anarcho-capitalist, and RP and I thus differ on a number of issues.

The good thing about RP is that he, like previous Austrian School economists, gives us an alternative view to the Establishment's nonsense. I suggest you read Dr Paul's book "The Case For Gold". It gets into more detail than he is able to in his speeches.

Here's to you, RP.

Personally i realize that as much as we think we know, we don't know everything. That being said, with the information I've seen, despite by business classes describing the FED's job as a "matter of fact", i see more harm than good coming from it. This is mostly because i know that "absolute power corrupts absolutely".

They have a LOT of power that was intended for the people instead of the bank executives. People THINK they have more now then they did 50 years ago, but the average person is in a much larger debt. This creates a much more difficult time for anyone looking to get ahead financially. These boom/bust cycles are simply CAUSED by the banks. We can't get around this.

However, i guess this depends on whether we care more about ourselves, now, or our children in the future. The system we have right now is all about sacrificing the future for the present. This i see as a problem.

Kerry, you bring up good points i haven't yet taken into consideration. Thanks for the debate.

doesn't that mean that if the reserve turned profit then america turned a profit?

No. In the current environment, it theoretically just means deflation in the coming cycle. In practice, however, we are still in an inflationary cycle. This means that prices are artificially high-thus the purchasing power of the dollar will continue to decline. So, for the forseeable future, producers will continue to try to stay afloat by producing. Much of this will go to waste because the typcial consumer is burdened with debt (and interest) from the beginning of the inflation cycle.

In short-the elite bankers and politicians will get richer and the typical person will become materially poorer.

Expect class warfare to be stoked by the political class in order to consolidate power.

You're quite welcome, Drivin'. I wish I had more answers, but the reason I don't is because I'm not sure I thought of all the questions. But there are some hard answers I DO have from experience from having gotten burnt a time or two. And from agonizing over courses of action that turned out to be correct, but seemed counterintuitive at the time.

For instance, I missed Black Friday in 1987-- I was completely out of the market by May of that year. It seemed to me like the markets were operating on the Bigger Fool theory and it didn't make sense to me, so I got out.

I avoided the Internet bubble of the late 90's. Again, rabid speculation fed by financial gurus chumming the waters with false promises of risk-free gains there for the asking in the emerging new electronic markets of the space age
didn't make sense to me, so I stayed away and put money into what I knew.

I remember the 70's and 80's when Paul Volker was taking a HUGE amount of flack for tight-fisted monetary policy-- which turned out, historically, to have been pretty well vindicated. I loved those years because I was making decent returns of 8% on repurchase agreements of high quality commercial paper. I had just payed off my student loans and was working a job AND being an entrepreneur.

Conversely, I HATED the 2000's. I wanted to buy a house again to replace the one I lost in my divorce settlement. But everywhere I looked, really crappy places were selling at prices that didn't make sense. On loans that made even less sense. I suspect that after all the bloodletting is over, I'll find something I can pay cash for and live happily ever after. For now, renting makes more sense.

Even though it seems like the FED screwed up, and I'm not letting Alan Greenspan off the hook, I just wonder how much worse it all would have been without a FED at all. I think the FEDs errors were of _ommision_, and not commission.

BTW, check out the financial news today for Warren Buffet's commentary on the FED-- he thinks the government did a good job in keeping things from having gotten a LOT worse than they could have been. The Oracle of Omaha has been right so many times about so many things.

-Kerry O.

And Howard Buffett was a member of the John Birch society, not to mention an earlier, ultra-conservative version in Congress of Ron Paul.

The son built a financial empire off practicing value investing, not by running a a Far Right ideological glee club.


-Kerry O.