Can Congress Dissolve The Federal Reserve?

[tenthring]

Originally Posted by Emily

You might be surprised to learn that the US has federal price controls on milk. If done right it need not be a fiasco, just like what the Fed does.

And does a bad job of it. Milk is far to expensive and out of reach for people. In fact the entire agricultural subsidy system is a monumental failure that is going to cause millions to starve this year alone.

[ShebaPoe]

Originally Posted by asdfasdf

So, how would a free market set the rate that the central government lends money to major banks?

The government doesn't lend money to banks. Banks lend money to the government. (This is where money comes from. Failure to understand this is the cause of much financial and political ignorance.)

So long as there are federal guarantees on the banking system they're stuck setting the price.

Wrong. The Federal Reserve is a private institution. You think there is a guarantee on those Federal Reserve notes? Those are liabilities of the central bank. If there is a guarantee, why do they keep going down in value? If the Fed goes insolvent, your money won't be worth the paper it si printed on. (Insovlency would be characterized by severe inflation, not a bankruptcy filing).

Now one could argue that the government shouldn't control the money supply and everyone everywhere should use gold, but at this point in time I don't think that's a reasonable alternative.

The free market can control the money supply without (a) gold or (b) the government. Money has a price, just like tacos, fish, cars and light bulbs. The price of money can be thought of as the cost to borrow.

(Oh, and when civilization falls I'll take guns, drugs, and durable foodstuffs far ahead of gold, what do you plan to do with the gold when all the uppity starving city folk come to take your food? If governments fall do you think they'll go out of their way to protect your property rights?)

I've got a fairly large amount of gold - more than the median household income for an American - in a safe deposit box overseas in a country where you can obtain a permanent residence Visa through the purchase of property. That's my oh sh!t stash. Or maybe I don't. And...I am the uppity city folk.

Now go learn something about the Fed and central banking.

[ShebaPoe]

Originally Posted by Emily

You might be surprised to learn that the US has federal price controls on milk. If done right it need not be a fiasco, just like what the Fed does.

I don't know what you are trying to say.

The Fed has failed miserably; dollars are worth 4% of what they were worth when the Fed was created, and have never been lower in value than at the present time. Bubble after bubble has come and gone. Depressions and recessions have not been amelioreated; our period of biggest sustained prosperity since the creation of the Fed came after much of Europe was reduced to rubble, tens of millions were killed, Asia was devastated, Japan was neutered and the USSR's umbrella stifled much of the world.

So for a while, the US prospered. Europe was in ruins, Communism took care of Russia and China, post colonial issues slowed India, and surprise, the USA (not attacked in WW2 except for one navy base in a territory) did well for 25 years. Communism is gone, Russia and others are energy powers, China is back, Japan is back, India is growing, and the USA is lowering the value of its dollars and making food and energy ultra-expensive because the Fed mis-priced money and banks are insolvent. (check the non-borrowed reserves of member institutions).

The Fed was created in 1913. Since the, we have had

WW1
speculative asset bubble in the 20s
depression in the 30s
War and post war boom because we were the only major first world country that didn't get the crap kicked out of it during WW2
Stagflation and recessions in the 70s and early 80s.
recession early 90s
Asset bubbles (dot com and real estate) to present
Record high energy costs presently
Negative savings rate presently

The Fed has failed. When you screw with the price of money for political reasons, the people take it in the rear end.

Last not least -

Agricultural price controls and subsidies are one of America's most immoral and shortsighted policies. It kills the third world. Literally. we should be ashamed.

You need not be Ludwig von Mises to see the error of price controls.