15 responses to “Fed Creates Boom & Bust Cycles and Should Be Abolished”

  1. John

    End fiat money, fractional money and the reserve. Read “The Creature from Jekyll Island” – tells the true story about the fed.

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  2. jay

    andrew jackson had it right the government is the only one that can print money. the fed is not the government. that’s the first contracting out job that needs to be restored to the government. once the government has control of the ability to print money again then we can tell the yahoo’s in washington you will now be held acountable.

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  3. Danmcl

    Observer,

    You might want to have a little skepticism on the Wikepedia article. The period they view as the long depression is more a recogition of the period of general deflation. This is a quote from “Recent Economic Changes” By David Wells, published in 1900, ragarding the economic conditions of the prior quarter century:

    “As an immediate consequence the world has never seen anything comparable to the results of the recent system of transportation by land and water; never experienced in so short a time such an expansion of all that pertains to what is called “business”; and has never before been able to accomplish so much in the way of production with a given amount of labor in a given time.”

    That does not sound like a 23 year depression to me. It sounds like they need to go back to the drawing board to find a better system of determining the real significance of economic events. Their definitions are wrong.

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    1. observer

      Ok, who cares about the whole 23 years, my point is not to split hairs. My point is to say that boom and bust cycles are not a Federal Reserve creation.

      How about about the panic of 1873 which ***occurred while the US was on the gold standard*** by the way. Does any of this sounds familiar? Please let me know your thoughts:

      “In Vienna and Berlin, Paris and London, St. Petersburg and New York, the business cycle had run its course. The failure of the Jay Cooke bank, followed quickly by that of Henry Clews, set off a chain reaction of bank failures and temporarily closed the New York stock market. Factories began to lay off workers as the United States slipped into depression. The effects of the panic were quickly felt in New York, more slowly in Chicago, Virginia City and San Francisco.[15][16][17]

      The New York Stock Exchange closed for ten days starting September 20. Of the country’s 364 railroads, 89 went bankrupt. A total of 18,000 businesses failed between 1873 and 1875. Unemployment reached 14% by 1876, during a time which became known as the Long Depression. Construction work lagged, wages were cut, real estate values fell and corporate profits vanished.[18][17]

      Recovery from the crash was much quicker in Europe than in America.[19][20] Moreover, German businesses managed to avoid the sort of deep wage cuts that embittered American labor relations at the time.[20] There was a racial component to the economic recovery in Germany and Austria as small investors irrationally blamed the Jews for their losses in the crash”

      »crosslinked«

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    2. observer

      And while I was avoiding getting into the definition of a ‘depression’, ‘recession’, or ‘panic’ as that is separate of whether or not business cycles occur in a free market system, I found this interesting….

      If we have 14% unemployment, wages being cut, construction disappears, real estate values fell and corporate profits vanish, people will romanticize this central-government led era?

      Maybe so, as this is the burgeoning era of the internet and cloud computing. Who knows what will happen in the next 20 years, even if there is widespread unemployment and deflation. For example, substitute ‘internet’ with ‘transportation’ in your 110 year old paragraph:

      “As an immediate consequence the world has never seen anything comparable to the results of the recent (development of a worldwide interconnected computing system); never experienced in so short a time such an expansion of all that pertains to what is called “business”; and has never before been able to accomplish so much in the way of production with a given amount of labor in a given time.”

      Interesting thought huh?

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  4. John

    Sorry,a little off topic — on AIG

    What’s bad about this is that Congress and the bankers seem to be playing the “good cop, bad cop game,” for whatever reason (perhaps campaign contributions, perhaps lots more we don’t know about). Because until Cuomo blew the whistle it was business as usual – our Congressmen got “outraged” and “dismayed,” and then…gave more bailout money without ANY oversight. They didn’t even bother to READ the full document. Imagine them doing this with their own money? But this was taxpayers’ money, more than a trillion and counting, so they couldn’t care less. Now they are “outraged” again – at the CEOs, I’m not – it’s the CEO job to legally take for the company as much as they can. I’m outraged at the Congressmen and the President who failed to watch over the CEOs. They were fooled? Come on, how naive would you have to be to believe that private companies will think of the benefit of others that they don’t have to think about? If you really are this naive or stupid, you don’t belong in Congress. But I suspect it’s not the naivite, but the Congressmen’s own greed, which is even worse. And, by the way, they were also part of the problem,but continue to have handsome government salaries/benefits and even fly on those jets that the CEOs can’t have. The president, the speaker, and the rest of this circus should also share in the nation’s sacrifice.

    Finally, AG Cuomo is a bright spot in all this. And, not to mean anything bad, I’m really happy he wasn’t appointed senator – someone needs to take care of this mess, and he’s the man for the job.

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  5. Franz Glaus

    It’s amazing how ingrained the Fed has become to our way of thinking. People who should know better, see the Fed as a necessary part of our economic system. This will require a national effort of education. Congressman Paul is really today’s Paul Revere, riding coast to coast to deliver the urgent warning about the imminent takeover of the United States by powerful, private interests.

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    1. observer

      I find it amazing at times how people think the implication that the fed is the sole producer of boom/bust cycles… Wouldn’t a free market system (a pre-Fed era) do the same thing?

      Look at the depth and duration of recessions in the US, be sure to compare pre-fed with post-fed:

      http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

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      1. Nate Y

        No. A free market system with sound money and full reserve banking would not do the same thing as the current centrally planned stystem with fiat money and fractional reserve banking.

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        1. Pras

          Full reserve banking is impractical. Although other two issues like central planning and fiat money we need to get away with.

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          1. Nate Y

            We’d just have to see. I’m confident the free market would eventually do away with fractional reserve banking.

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        2. observer

          To be clear, you are saying there would NOT be boom/bust business cycles if we adopted a gold-based monetary system?

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          1. Nate Y

            Nope. That is not what I’m saying.

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          2. observer

            So if the free market also creates Boom and Bust cycles, we should abolish that too?

            I mean, isn’t that what this headline is implying?
            “Fed Creates Boom & Bust Cycles and Should Be Abolished”

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          3. Nate Y

            Saying “booms and busts can happen under a gold standard” is quite distinct from saying “the free market creates boom and bust cycles”. While a gold standard would demand a more disciplined economy, it is not an absolute guarantee from booms and busts. Happily, no one is claiming a gold standard as a solution to all our ills.

            If you want to speak in general terms, the claim is free market economies are much more efficient at allocating resources than centrally planned economies.

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