OK, let us dissect this, shall we? :)
Quote:
Originally Posted by cykoe6
(Post 15185621)
I fail to see what your no doubt principled opposition to the US monetary system has to do with someone running a massive investment fund ponzi scheme.
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The ponzi scheme relation lies in several factors. The first is the fractional reserve system, which per se isn't unique to the Fed, although its existence and morality can can be debated despite it being legal. But I digress, what I wanted to say is that the (private) owners of the Federal Reserve became shareholders through the simple magic of fractional reserve upon the US government depositing its share of the initial capital. The Fed "loaned out" the money for the remaining shares (multiplied thanks to the fractional reserve requirement) to its other shareholders, who then "deposited" it back in as capital to cover the purchasing of their shares.
Now, you are no doubt aware that the Fed can engage in market operations which, in layman's terms, mean that they can purchase equities, securities, commodities as well as goods from John Doe, if needed. The Fed's market operations used to be restricted to purchasing government securities, then expanded to foreign governments' securities, then expanded further and further and further. Today, the Fed can purchase or sell pretty much anything. How does it pay for this? By adding an entry to either side of a T account in its books. No actual money ever switches hands, it's created out of thin air. What this means, in practice, is that the Fed can purchase your house, your car, your local bank, your local Walmart or Mickey Dee's and pay for it with an electronic transaction, thus acquiring real value at the price of... nothing, really. You get worthless money, they get your house. Of course all this is subject to additional clarifications to why it would be utterly dumb of the Fed to actually go out and buy these things, but I hope I've illustrated my point. The Fed has actually spent a few trillion the past couple of months buying up stuff, the nature and value of which it declared to be "counterproductive" to disclose. :)
Quote:
Originally Posted by cykoe6
(Post 15185621)
Perhaps you can enlighten me on what makes the US central bank and monetary system fundamentally different or worse than the central banks and monetary systems that exist in most other industrialized nations? How does it fundamentally differ from the Bundesbank or the European Central Bank?
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Neither the Bundesbank nor the ECB have private owners, as far as I know. That would be the biggest difference, which would allow the Bundesbank/ECB to print debt-free money and not pay interest on it to a privately-owned FOR PROFIT corporation. Other than that, yes, the fractional reserve system and lender of last resort practices are the same, specifically as Bundesbank was created with the Federal Reserve as a model and the ECB later modelled after it.
Quote:
Originally Posted by cykoe6
(Post 15185621)
I have heard a lot of criticism of the Federal Reserve from people on this board and much of that criticism seems to come from people who live in countries that have similar systems featuring independent central banks and fiat currencies.
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Neither independant central banks nor fiat currencies are inherently bad. I may personally have a problem with the fractional reserve banking, but then again that one has been tried and deemed legal. The main problem arises when you have to pay interest on the money the central bank issues, along with allowing the central bank's operations to extend to buying more than just securities. The risk of someone, somewhere pulling a fast one and exchanging electronic transactions for real value is too big and no central bank should really be allowed that power. We need to remember that money in itself is really worthless and currency only exists to facilitate the exchange of other goods goods and services.
Quote:
Originally Posted by cykoe6
(Post 15185621)
I have not heard too many alternatives proposed except a return to the mythical "gold standard." Perhaps you can explain to me your proposed alternative as well as the implications of such a change. Perhaps you would also like to enlighten me on how the monetary system in your country is superior to the US system. I thank you advance for showing me the truth.
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I am not a professional economist so I will not enter into a lengthy debate on whether my ideas would be better than what is currently in use. However, to raise a few points, I am personally against a gold standard for various reasons, not least of which being the uncertainty of the whereabouts of the gold itself. I believe the last president who audited Fort Knox's gold inventory was Eisenhower, so few people really know how much gold, if any, is still kept there.
Something else I would propose is nationalizing all central banks. Give them independence from the government itself and a clear independent mandate, but eliminate the need for profits to line the pockets of private ownership. Furthermore allow the central banks to only operate in the securities market, predominantly government securities.
Anyway, this ended up being longer than I had initially intended it to be, but I hope I at least succeeded in illustrating my own point of view on the matter. I am sure you may have a differing opinion, which I will gladly listen to.
