The Gaming Den

So what the hell is up the US Federal Reserve? It is basically a bank backed that owns most of US debt and has the ability to print money as well as the power to control interest rates across the country. These two factors mean that the bank has the power to infinitely inflate the currency to create an artificial profit for themselves at the cost of everyday americans. It is basically theft concealed under an economic blanket.

What's more is that the recession was originally caused by the bursting of the housing bubble due to excessive burrowing. Yet the fed did nothing to prevent this.

It has the power to infinitely inflate currency, but notice a lack of a $50,000-dollar bill being used to buy soup cans.

There's a lot of accusations leveled at the fed, and if you listen to even half of them you're going to be huddled under a blanket with a shotgun waiting on the Chinese Debt Collecting Ninjas come to claim their ownership of our country and torture babies.

The Fed possesses the power to set interest rates, but that is not the same as abusing the power to set interest rates. Also, I am pretty sure that the people who run the Fed actually have no incentive whatsoever to cause the Fed to turn a profit because their salaries are not determined by that. Although they're not entirely part of the federal government, the board is partially or entirely made up of presidential appointees and the Fed charter is written by Congress.

Instead of a bank, it is more accurate to think of them as a special government department that is largely exempt from the standard administrative rules and with an unusual degree of independence from Congress. Legally speaking, that's not technically the case, but it is an adequate summary of how it actually works as far as random ordinary citizens are concerned.

Also, well prior to the recession they were fiddling with interest rates in a way somehow intended to prevent the recession, although I can't recall the details. Once it actually hit, they pretty much zeroed interest rates and started handing out bags of money to reduce the impact.

The Fed seems suspicious because it has a lot of power with little accountability or transparency. Which means it may of may not be up to shenanigans. Occasionally information about the Feds policies come out, but it's hard to comment on them, because who drafted them and what their real goals are, are not known to the public.

If there were 50000 bills going about right now then it would lead to a revolt. So that is not really a point in the Fed's favor. And while I do understand that giving out money can give people the resources they need to continue giving out credit to stimulate the economy it was once again taken out of the pockets of the citizens, so it kinda seems like a neutral option in the end.

I just want to understand the issue here as I feel that the FR has a pretty big impact on global economy.

The Fed is not particularly evil or scary, and is certainly less evil than having a central bank in every state printing their own U.S. dollars, or allowing private banks to print their own money, or independent gold and silver mines to mint their own coin. Their power is more dynamic than the legislation-driven ability to levy and remove taxes, but that's more of a balance issue than anything else.

In this thread: concern trolling.

Dominicius wrote:If there were 50000 bills going about right now then it would lead to a revolt. So that is not really a point in the Fed's favor. And while I do understand that giving out money can give people the resources they need to continue giving out credit to stimulate the economy it was once again taken out of the pockets of the citizens, so it kinda seems like a neutral option in the end.

I just want to understand the issue here as I feel that the FR has a pretty big impact on global economy.

I really do not understand what you are getting at. Every currency worth the name has some body that controls the rate at which it is issued. In the case of America this is the Fed.

They don't take money out of the pockets of citizens, they literally print it or think it into existence at whatever rate seems economically wise. This can cause inflation, but odds are that the average citizen has more debt than cash savings and so are helped by inflation because it makes both of those things smaller.

Do you have some specific concern with the actions taken by the Fed, or is this some sort of generic central bank phobia?

Juton wrote:The Fed seems suspicious because it has a lot of power with little accountability or transparency. Which means it may of may not be up to shenanigans. Occasionally information about the Feds policies come out, but it's hard to comment on them, because who drafted them and what their real goals are, are not known to the public.

Which isn't actually a big deal, because while the Federal Reserve has the initiative on abusing its power or taking on policies heavily disfavored by the majority, it won't be able to do that for long. You may as well be worrying about the USSC or the Secretary of Defense going maverick. But we don't, because we also know that in most cases (obviously this doesn't apply to things like nuclear assault) someone going maverick can be cockblocked before they do too much damage.

If you're worried about Fed Reserve policy, you should really be paying attention to what Congress and the President are doing. If they're making no real moves to combat about what the Fed is doing, either they approve of it, too or they're woefully incompetent. The latter of which is always a worry, see the ECB, but ultimately the problem is with the overseers.

Of course, you will (very, very) occasionally get the problem when the Fed Chairman is taking or trying to take the correct action but the Legislative/Executive branches don't approve. In this case it's the public's responsibility to put pressure on these branches not to fuck things up. This of course can create problems like Volcker restricting the money supply to cause a recession (and halt stagflation) which is the correct cure but politically unpopular. The only way out of that mess is to educate the public much more on economics than they currently are educated or to give the Fed Reserve Chairman and other such branches some wiggle room with the opportunity to fall on their sword if things don't work out.

Lago PARANOIA wrote:Which isn't actually a big deal, because while the Federal Reserve has the initiative on abusing its power or taking on policies heavily disfavored by the majority, it won't be able to do that for long.

Really? How many people approve of the Fed giving 0.01%. That came out three years after the fact. The problem with that is secrecy. Secrecy and democracy don't mix well because the populace and its elected representatives have to be informed to make good decisions.

Juton wrote:Really? How many people approve of the Fed giving 0.01%. That came out three years after the fact.

Let's not talk about whether they were a good idea or not. Instead, let's consider that the Fed is still ultimately in the hands of the executive and legislative branches and therefore you have a handful of scenarios to explain this disconnect:

[*] The government didn't know what the Fed is doing.
[*] The government knows what the Fed is doing but is powerless to stop them.
[*] The government knows what the Fed is doing but enough players are in cahoots with them. That is, they'll publicly bitch about policies like you highlighted but hi-five the governors when the cameras are off. This implies malfeasance and/or condescension towards their constituents, which the hateful bastard in me implores me to rate this possibility as most plausible.
[*] The government is so pig-ignorant that they don't know what policies like this even means so lets the Fed gets away with this.
[*] The government actually took steps to reverse this but in the intervening three years was unable to complete this COA or at least take convincing enough steps. We just don't know about it.

Either way, the ultimate problem lies with Congress or the Executive branch. Bitch at the President and/or his Congressional cronies.

Juton wrote:The problem with that is secrecy. Secrecy and democracy don't mix well because the populace and its elected representatives have to be informed to make good decisions.

Again, you should be leaning on the two oversight branches. Either they need to be more on the ball about what the Fed is doing or they need more power to control their actions.

I have a hard time seeing that the problem with this whole debacle is secrecy. It'd be much better to blame some combination of: government paralysis, voter and representative ignorance, or harmful representative self-interest.

Lago PARANOIA wrote:I have a hard time seeing that the problem with this whole debacle is secrecy. It'd be much better to blame some combination of: government paralysis, voter and representative ignorance, or harmful representative self-interest.

It's a bit of a catch-22 isn't it? The voters are ignorant of what the federal reserve is doing, so they don't make it an issue with their representatives. It's not an issue for the representative because their voters don't bring it up. The voters don't ever get informed about it, nothing changes.

I think a democratic government needs to be as transparent as possible for it to do the best job of representing the people's interest. Does the US benefit, at all, from having a more opaque central bank?

Yes, because economic instability is potentially self-reinforcing. If it were known that the Fed thought a company was financially unsound, there would be a crash in the price of that company's stock simply because the Fed thought one was potentially likely.

I mean, notice how European bonds fall every time the ECB opens its mouth. That is only partially because the things they are saying are stupid.

Juton wrote:Does the US benefit, at all, from having a more opaque central bank?

Maybe. We can't know for sure whether or not it would be an issue, but it could be the case that we benefit from it's opaqueness in that the average American is stupid, and wants stupid things, and therefore, if they did know what was going on, they would tell their representatives something stupid, which would be acted on, thus making things worse.

An additional problem is the infamous confidence issue. It's certainly possible that given a more transparent system, people would be able to see more easily when X is fucked up, and therefore, act rationally with respect to themselves, but in a way that fucks over the total economy. Shifting money around subject to planned Fed moves or specific Fed advisory reports could create problems in that way.

The motivation for the officials to actually do oversight comes from people bitching at them or it hurting their reelection chances. Now, while the average U.S. voter is already notoriously uninformed about issues which are public knowledge, they will always be uninformed about issues which are just not made public. The public can't respond to anything that is being kept secret, which means the pressure on elected officials to do their job on such matters is low.

At any step of the democratic chain where there's that sort of secrecy, you can't actually have indirect accountability to voters through elected officials, because the elected officials only care as much as the voters know.

And on the flip side, the fed's full of sensitive internal information which would drive the market to weird places if it were available and lead to lots of shenanigans about expected Fed action. I'm not sure a transparent fed is incompatible with a stable economy in general, but I don't think it's compatible with the way we do things.

Kaelik wrote:Maybe. We can't know for sure whether or not it would be an issue, but it could be the case that we benefit from it's opaqueness in that the average American is stupid, and wants stupid things, and therefore, if they did know what was going on, they would tell their representatives something stupid, which would be acted on, thus making things worse.

You know, that's a great point. I don't believe a pure free market system could work because the average consumer is dumb and feckless, I don't know why I assume the average voter isn't. I'll have to think about that.

DSMatticus wrote:At any step of the democratic chain where there's that sort of secrecy, you can't actually have indirect accountability to voters through elected officials, because the elected officials only care as much as the voters know.

Juton wrote:It's a bit of a catch-22 isn't it? The voters are ignorant of what the federal reserve is doing, so they don't make it an issue with their representatives. It's not an issue for the representative because their voters don't bring it up. The voters don't ever get informed about it, nothing changes.

Most generously, GENEROUSLY speaking the average voter doesn't technically have to hold the Fed accountable. They just need to go 'oh hey, bad economy' and lean on/punish their representatives who will presumably be more informed and know who the actual economic culprit.

I emphasize that this is a generous interpretation, because this requires a lot of assumptions -- most notably, that even if the representatives care, they will actually know how to direct the Fed properly. For example, the politicization of UK's Central Bank was a huge disaster. But as assumptions go, I don't think that it's a particularly bad one even if it's naive. Because if you have a maverick/incompetent/malicious government to the extent where they can't or don't put into place the policies that will have the effect that the voters want, you have bigger problems. Not THAT much bigger (see this current financial crisis) but still.

I think a democratic government needs to be as transparent as possible for it to do the best job of representing the people's interest. Does the US benefit, at all, from having a more opaque central bank?

Not at all, but it's not as if the central bank is operating in secrecy like, say, the FBI. The information is there to be dissected and disseminated by pundits and representatives. For whatever reason (cronyism, partisanship, media malfeasance, voter education, voter awareness thresholds) the average U.S. voter doesn't seem to be all that informed.

But I think that it's misguided to blame the Fed. You should blame some combination of the voters, representatives, or media that a Fed Reserve that operates completely transparently is nearly indistinguishable in terms of voter ignorance from one that operates in secrecy. Solve that problem first. Because this problem also applies to other agencies like the CIA or U.S. judiciary.

Lago PARANOIA wrote:Not at all, but it's not as if the central bank is operating in secrecy like, say, the FBI. The information is there to be dissected and disseminated by pundits and representatives. For whatever reason (cronyism, partisanship, media malfeasance, voter education, voter awareness thresholds) the average U.S. voter doesn't seem to be all that informed.

I don't think this is true, I don't think the average congressman or senator can get a complete accounting of who the Fed deals with. At least this was the case with how 600 billion QE2 is allocated.

But I think that it's misguided to blame the Fed. You should blame some combination of the voters, representatives, or media that a Fed Reserve that operates completely transparently is nearly indistinguishable in terms of voter ignorance from one that operates in secrecy. Solve that problem first. Because this problem also applies to other agencies like the CIA or U.S. judiciary.

Don't get me wrong, I do apportion blame to the representatives that stifle efforts to audit or otherwise examine the fed. I don't think the Fed is mandated to secrecy though, I could be wrong on that, so it could be more transparent if it wanted. An ethical case can be made that the Fed should be more transparent then it is, by being less transparent it acts contrary to US ideals of governance.

Juton wrote:I don't think this is true, I don't think the average congressman or senator can get a complete accounting of who the Fed deals with.

Can't get, won't get, or is too ignorant to get? These have different implications and fixes. Considering the rise of the American Tea Party and the renewed focus on Fed conspiracy theories (going well past warranted criticism of Ben Bernanke into crazy NWO crap) since the financial crisis of 2008 I find it extremely improbable that the Fed is either through action or inaction denying information to the average Congressman who really wants it. This is certainly not the case for party leaders or people who sit on financial or regulatory chairs (the people who actually do the moving and shaking of bills) -- if it were, it'd imply a government much more dysfunctional than even I'm willing to ascertain.

Too ignorant to make use of the information they're given? That's a lot more believable. And if that's the case increased transparency isn't going to solve the problem. I mean, shit, how many people can tell you what went on during any legislative sessions in the past week in any detail that wasn't trumpeted by the MSM? And we have CSPAN1 and CSPAN2.

Lago PARANOIA wrote:Can't get, won't get, or is too ignorant to get?

Leaving aside the ubiquitous (in matters of the Fed) Ron Paul, I'm pretty sure at some point Grayson, Kucinich and Sanders made attempts, for naught. That's two democrats and an independent, so it's not just a right wing issue.

These have different implications and fixes. Considering the rise of the American Tea Party and the renewed focus on Fed conspiracy theories (going well past warranted criticism of Ben Bernanke into crazy NWO crap) since the financial crisis of 2008 I find it extremely improbable that the Fed is either through action or inaction denying information to the average Congressman who really wants it. This is certainly not the case for party leaders or people who sit on financial or regulatory chairs (the people who actually do the moving and shaking of bills) -- if it were, it'd imply a government much more dysfunctional than even I'm willing to ascertain.

I can't say for party leaders, but as I've mentioned, several congressmen felt that they weren't getting the full story. Still, the congressmen do the voting on the bills, even if the general public shouldn't be privy to the information, surely the congress should.

Too ignorant to make use of the information they're given? That's a lot more believable. And if that's the case increased transparency isn't going to solve the problem. I mean, shit, how many people can tell you what went on during any legislative sessions in the past week in any detail that wasn't trumpeted by the MSM? And we have CSPAN1 and CSPAN2.

I haven't seen much US CSPAN, I've seen some of the Canadian equivalent though. It's not a matter of complexity, parliamentary sessions are pretty boring, that's what keeps most of public from watching. I think I know a few older people in town that will tune in for debates on specific bills, but they are the rarity. So, I think a portion of the public can keep up with these types of matters, why deny them that chance.

Juton wrote:Leaving aside the ubiquitous (in matters of the Fed) Ron Paul, I'm pretty sure at some point Grayson, Kucinich and Sanders made attempts, for naught. That's two democrats and an independent, so it's not just a right wing issue.

I can't say for party leaders, but as I've mentioned, several congressmen felt that they weren't getting the full story.

That doesn't mean that the information is actually unavailable. It's also quite likely just grandstanding and/or trying to gain sympathy for a position counter to the mainstream. Whether their criticisms of the Fed are correct is one thing, but people grumbling about the Fed's transparency doesn't actually mean that the Fed isn't reasonably transparent.

Creationists whine all of the time about 'releasing the data' after all. There are always going to be whiny bitches who complain that they're not being told the full story of what they're voting for. Since those people you mentioned do not sit on any financial chairs and are fairly marginalized within their own party, this is not surprising.

Juton wrote: Still, the congressmen do the voting on the bills, even if the general public shouldn't be privy to the information, surely the congress should.

Why would that necessarily make a difference? Hell, why is that necessarily even a problem in the first place? There are very few, probably none in fact, Congressional or executive staff who knows the ins and out of every or even most bills. Not just Fed bills, but bills in general. It's why we, or at least the U.S., have committees.

Even if you could find 70% of Congressmen who don't know the ins and out of any bill that sets the Fed's goals or charters, that doesn't mean that the Federal Reserve is hiding information. More likely they're just ignorant and are trusting other people in their party to steer them in the right direction.

But Congress can pass a bill that modifies the Feds character and gives them that information. So if they can't get that information, it's because Congress doesn't really want that information that much, and the previous Congress that wrote the charter (or last modified it) specifically choose to deprive themselves of that information.

Lago PARANOIA wrote:That doesn't mean that the information is actually unavailable. It's also quite likely just grandstanding and/or trying to gain sympathy for a position counter to the mainstream. Whether their criticisms of the Fed are correct is one thing, but people grumbling about the Fed's transparency doesn't actually mean that the Fed isn't reasonably transparent.

Finding a concise summation of what a given congressmen can and can't find out about the Fed isn't the most obvious thing to find. As I've mentioned I don't think the congressmen get all the information they want, for instance in this clip Sanders asks Bernake about the recipients of some loans from the Fed.
http://www.youtube.com/watch?v=P8p0nBa8 ... re=related

From this it seems that Sanders went looking, but couldn't find what he was looking for. And Bernake flat out says he won't release that information (around 1:20). So you have a congressman asking the Fed chair for information, and the fed chair declining to give that information.

Whatever wrote:In this thread: concern trolling.

Yep. But that's because conservatives are phobovores and their talking points are chef knives.

name_here wrote:

Dominicius wrote:If there were 50000 bills going about right now then it would lead to a revolt. So that is not really a point in the Fed's favor. And while I do understand that giving out money can give people the resources they need to continue giving out credit to stimulate the economy it was once again taken out of the pockets of the citizens, so it kinda seems like a neutral option in the end.

I just want to understand the issue here as I feel that the FR has a pretty big impact on global economy.

I really do not understand what you are getting at. Every currency worth the name has some body that controls the rate at which it is issued. In the case of America this is the Fed.

They don't take money out of the pockets of citizens, they literally print it or think it into existence at whatever rate seems economically wise. This can cause inflation, but odds are that the average citizen has more debt than cash savings and so are helped by inflation because it makes both of those things smaller.

Do you have some specific concern with the actions taken by the Fed, or is this some sort of generic central bank phobia?

More of a general issue, considering how little is known about its internal actions + the effect of those actions on the economy. It seems with time I am becoming more and more skeptical regarding intervention of government institutions in economics. In it's current form at least.

While inflation does reduce debt of the average citizens it also reduces their overall wealth because unlike the fed they are not allowed to print their own money. So effectively the situation remains the same for them. The only scenario where a citizen can benefit is when he can get direct access to the fed printed money which is what I think is what the Fed is aiming to do by giving the money to the banks so that they can then loan it out to the citizens under a 0% interest rate. In any case, I would assume that most of that money will still be eaten up by the banks first to cover their own debts first before any true distribution will happen.

And I am also not quite sure how much control the individual banks have over the money. Lending it out under a 0% interest rate is not exactly profitable for them, especially when the business climate is as unstable as it is now. They would more likely invest in government bonds and the already rich firms rather than loan to make a more guaranteed profit.