re: #615 3 wood

The very fact that monetary policy works holds the answer for you:

What value of “works” are you using? Interest rates held artificially low created the dot-com boom. When that bubble burst, interest rates held artificially low created the housing bubble. Now that the housing bubble burst, they’re holding interest rates low. Now we’re building another stock market bubble. Has it escaped your notice that the P/E ratio of the S&P 500 is now *60 times higher* than the worst it got during the Great Depression?

(mybudget360.com)

It couldn’t have escaped your notice that the dollar has been inflated so much since the Fed came into existence that it’s now worth 5% of what it was in 1914. Right?

So what definition of “works” do you use? What do you think the Fed is doing now, or has done in the past, oh, 50 years, that was *good monetary policy*? I can think of a single thing: Volker’s biting the bullet and raising interest rates to mark the period at the end of the dreary dismal sentence that was the Carter administration. And today, he says he wouldn’t do that again.

This is *insane*. The Fed is *not* engaged in sound monetary policy. It is engaged in transferring the middle class’s money to Wall Street and in getting politicians relelected.

You can directly nfluence the market rates via monetary policy 3 ways:

1. By expanding/contracting the money supply through open market operations with lowers/raises interst rates respectively.

2. Raising or lowering the discount rate. This is a building block for market rates . Other components include risk and duration.

3. changing reserve requirements to tie up or free up reserves for lending purposes.

The Fed and indirectly influence them by buying or selling Treasuries, i.e., monetizing the debt.

Yes, and like I pointed out in another link, what they’re currently doing is an end-run around the prohibition against them simply buying US government debt up directly, by letting foreign central banks exchange their agency debt for US Treasuries. Why, for the merest second, would you consider that wise? Why do you think a practice that is essentially the Treasury printing money out of thin air will work out any better for us than it did for Zimbabwe?

That’s the *point* of the Fed. The government couldn’t continue to buy all the votes it does if it had to limit its spending to what it actually took in in revenues. The Fed exists to let the government engage in hidden deficit spending by means of devaluing the currency. It makes everyone poorer, except for the recipients of government largesse.

Letting Congress take over the Fed is literally like letting the fox take over the hen house.

The fox and the hens are already *living together in sin*. The Fed is, has, and will continue to do what the political powers *want* it to do, so these appeals to “But our independence!” are *risible*. These transactions the Fed’s engaged in with foreign central banks aren’t even subject to GOA audit. Why in the two-horned tapdancing Christ do you consider any of this a *good thing*?