Topic: Economics
Fed's Power Grab Never mind it is the sole cause for the out-of-control credit crisis, due to the practice of fractional reserve banking and its policy of creating paper assets based on assumed interest-based profits from loaned money, it now wants the power to further expand the crediting power of central banking institutions to prop-up the deflating bubble.by jposty
(libertarian)
Monday, May 5, 2008
The already all powerful Fed announced Friday that it's going to overstep its already unconstitutional mandate to begin controlling the credit market in an attempt to avert a global credit crisis.
Never mind it is the sole cause for the out-of-control credit crisis, due to the practice of fractional reserve banking and its policy of creating paper assets based on assumed interest-based profits from loaned money, it now wants the power to further expand the crediting power of central banking institutions to prop-up the deflating bubble.
The first weapon in the Fed's arsenal is to bulk up its emergency reserves supply to $150 Bn in May from $100 Bn in April and to coordinate further expansion with the European Bank and Swiss National Bank.
The move is an attempt to assuage banker's hesitance to expand credit to already questionable debtors to further stave off a deepening recession. These consumers are usually in debt or have been deemed unworthy for non-federally insured loans.
In essence the government is forcing the banking institutions to involve themselves further in bad business practices.
The Fed is also expanding the types of assets that investment banks can use as collateral to receive loans from the central bank. Also, in March the Fed used powers it was given during the Great Depression to allow it to make loans to investment banks, which is a stark difference to the accepted practice of making loans to commercial banks exclusively.
The European Central Bank in an effort to stop the recent downtrend in the American economy is upping its currency auctions to $25 Bn, which is held every two week. Historically the ECB has only auctioned between $10 Bn to $15 Bn, without a set schedule.
"It is appropriate for us to take some action," House Financial Services Committee Chairmen Barney Frank said at a recent credit hearing. "As I look back at the subprime and the decision of Mr. Greenspan not to do anything for a long time, I wish we had been more able, more vigorously, to preempt him."
Congressman Barney is not the only federal employee offering solutions, Wednesday Senate Banking Committee Chairman Chris Dodd introduced a bill aimed at stopping "predatory practices by the card industry."
"Americans do not deserve to be pushed down the economic ladder by credit card companies," Dodd said. "It's wrong, it's unfair, and it must end."
Senator Dodd is 100 percent correct in his summation but wrong in his attribution. The credit card companies are only playing by the rules the Fed and US Treasury has set in place.
To truly stop the middle-class from being wiped out, monetary policy must be addressed not simple band aides to the dilapidated system that is the US economy. Deflationary practices used by the Fed create the outcome Sen. Dodd described. Debasing the currency only perpetuates wealth in the upper echelon of money lending to the detriment of the consumer.
By the time the dollar is debased it has already gone through a pyramid type scheme and the assumed benefits are no longer prevalent to the consumers, the market has already adjusted and the prices raised to the accommodate the new purchasing power, or lack thereof, of the dollar.
The American citizen can be assured the federal government will be there to solve the problems it creates 100 percent of the time. Maybe it's time for a change, allowing free-markets to operate without the hindrance of government's subsidization of bad business practices through the debasement of the currency and reactionary regulatory practices.
The views expressed in this
article are those of jposty only and do not represent
the views of Nolan Chart, LLC or its affiliates. jposty is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Posted By: Jake, the champion of the constitution
Date: 2008-05-05 06:20:27
Dear jposty,
Yep, the futures no good for the almighty dollar, thanks for the update. Asia just formed a new IMF yesterday since they see where this is all going. I thought you might enjoy a Fed puzzle I wrote up. Here's the link http://www.nolanchart.com/article3628.html
Would also be interested to hear what you think about Vern McKinley whos running for Congress in VA. He used to work for the Fed's board of governors. I just posted an article that has some links to him.
I'll have to look into McKinley... but my initial reaction to him serving on the Fed's Board of Governors is quite unfavorable. Unless he has Volker type leanings, which although still unconstitutional, would be drastically better than say Bernanke.
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