Eliminate Waste in Government - Abolish the Fed

A NY Times article points out a surprisingly somewhat neutral story about the Federal Reserve, and a plan from the administration to expand its market smothering powers.

"The administration is proposing to make the Fed responsible for identifying “systemic risks,” like the bubble in housing prices and the explosion of reckless mortgage lending that started the worst financial crisis since the Great Derpression."

Actually, this is misleading. It is the largest one year drop in the market since the great depression. It is the largest drop in GDP since the recession of the early eighties, hardly comparable to the Great Depression. I digress...but sometimes facts are funny things...especially to the NY Times.

So, who here didn't see the housing bubble coming? Raise your hand...go ahead. O.k., now ask yourself this very important question: why does the Fed need to be given this power? What does this new power really mean?

“I do not know of any clear examples in which the Federal Reserve acted in advance to head off a crisis or a series of banking or financial failures,” said Allan H. Meltzer, professor of economics at Carnegie-Mellon University and author of a comprehensive history of the Fed.

Mr. Meltzer ticked off a long list of financial collapses — the Latin American debt crisis of the 1980s, the savings-and loan collapse of the early 1990s, the collapse of the dot-com bubble and the recent binge in reckless mortgages — and argued that the Fed had either failed to take preventive action or made things worse.

“We all know that the Federal Reserve did nothing to prevent the current credit crisis” Mr. Meltzer said. “It has not recognized that its actions promoted moral hazard and encouraged incentives to take risk.”

The Times stops short of suggesting the Fed was actually part of the problem, bringing interest rates so artificially low that anyone was encouraged to purchase a home. Couple that with other regulatory agencies and committees, who manipulated market forces for political reasons and one has to ask if the Fed might have a little too much power. Let's not get started on the bailouts, strongarming banks into acquiring toxic banks, inflating the monetary supply etc.

One has to wonder if this activity is just simply wasteful. Instead of granting the Fed more power, how about abolishing the Fed? What value does the Federal Reserve provide in our daily lives? Can anyone put this in plain terms for me? Otherwise I'm going to wake up tomorrow and not wonder: "Geez, I hope the Fed is looking out for me and my family's future today!"

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