However, while man… Topics: Federal Reserve ... Federal taxes should not be abolished due to the fact that other taxes will soar in order to correlate income for the federal government that is absent from the removal of federal taxes. But what are the pros and cons of ending the federal reserve. This is a bad equilibrium where enough people think others will try to withdraw early. It is an issue that I don't know too much about I've done some research and by my understanding it seems that the main pro is receiving low interest rates on loans, but the major con is devaluing the USD. FreedomWorks makes it easy to hold your elected officials accountable in our fully interactive Action Center. It is truly surprising how few people really know what the Federal Reserve actually does. Blasto, Have you ever been to Turkey, because you seem to know you're way around Instantbull. As the title states what are some pros and cons to the Federal Reserve Bank? Inflation hurts the poor most since they have less disposable income. It was fueled by equity investors that made systematic errors in their investments. Second, the Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent, effective immediately. If today's economy was without the Federal Reserve, debt would be liquidated much faster, but most people would probably very uncomfortable with the sudden and unpredictable busts and the immediate loss of jobs that follow. The Federal Reserve Has Far Too Much Power to Control Our Economy. In 1973, at the end of the Vietnam War, Congress abolished the draft in favor of an all-volunteer Army (AVA). Pros and cons really depend on a personal preference on what type of monetary policy the U.S. is looking for. The fed is the banker to the bankers. If people are risk averse, then this market structure can't achieve the optimal outcome. And I want to say it's all too obvious that financial reform is needed, but the details are in the hands of politicians with disparate agendas. However, the very act of carrying out this function leaves banks open to bank runs. Some pros are that everyone gets a say. This is treason, for it has given a foreign entity power of US affairs, which is prohibited in the Constitution. And you want them to ENFORCE IT....? The central bank serves big spending politicians, big bankers and their friends. We discussed this problem with my colleagues (we work in SEO company https://www.linksmanagement.com) last week. It's very important for the lender of last resort or deposit insurer to have deep pockets. 1. Or maybe that Bureaucrat, that they appointed? Consumers with low disposable incomes will be negatively impacted by higher prices for food and clothing. Throughout its 100-year history, it has always operated under a veil of secrecy. So, maybe next time before you complain about where I got MY FACTS FROM, Timmy, maybe you need to PAY ATTENTION...you SCHMUCK! It bears significant responsibility for every financial crisis over the past century including the Great Depression, the stagflation of the 1970s and recent economic meltdown. If we have a central bank, it should be by unelected and unaccountable bureaucrats. Some one said here...We need a President and Congress with GUTS to ENFORCE THE CONSTITUTION.....Ok...you want them to lock up all the ENTITLEMENT CHEATERS? I don’t think every business cycle or economic bubble post-1913 has been caused by the Fed. Press question mark to learn the rest of the keyboard shortcuts, http://en.wikipedia.org/wiki/Hong_Kong_Monetary_Authority. Yes, that's right, Julie. It is often wrongly defined as the general rise in the price of goods and services. "...the ultimate issue that any smart politician would choose to lead and speak on is ensuring that these dollars hold their value over time. The People who chose credit cards with APR's, Tim, are doing so without really realizing they are conducting an INTERSTATE business arrangement with who they think is their LOCAL BANK. This is why high power lobbyists protect and defend the existence of the Federal Reserve. FreedomWorks Originals provides you entertainment and education to help you better understand economics, the workings of government, and our insight into the most important debates facing our nation today. IF you think it's BAD that maybe you're getting charged 15-33% APR interest on your Credit Card NOW...wait until your lazy CONGRESS, that should've put a INTEREST CAP on INTERSTATE CREDIT CARD agreements, when SCOTUS ruled over the "Fred" decision in 1978.... finally loses MORE control over the INTERSTATE commerce, when your local Bank has to go INTERNATIONAL to compete...and pretty soon, that bank down the street, might be from INDIA or CHINA (you'll be lucky if it's from BRITIAN) being governed by FOREIGN RULES, and customer service calls? The Federal Reserve Hurts the Poor and Middle Class the Most. None of this is setting the stage for a rapid recovery, or for robust growth thereafter. Federal Reserve Chairman Ben Bernanke has the power to dramatically impact our economy at a drop of the hat. The more dollars we have in the circulation, the less the currency is worth. Fortunately, there is significant support in Congress for a bill -- the Federal Reserve Transparency Act -- that would require a Government Accountability Office (GAO) audit of the Fed. One of the BEST THINGS that happened with the FED RESERVE, is the fact that OUR BANKS HERE have a UNIFORM CURRENCY...(in other words, they don't have to issue their OWN currency sets to circulate around, risking one local bank's currencies and another region's bank's currencies, to have INEQUAL values...and they BOTH SAY "DOLLAR..." WHY? For example if a state has 10 delegates and 6 vote democrat the other 4 Republican votes arent counted. The GAO investigators were not allowed to view most of the Federal Reserve’s monetary policy decisions including discount window lending, open-market operations and details on its transactions with foreign governments and banks. This is the antithetical to the principles that America was founded on. Simply not true. However, the boom (with jobs coming back) would follow much sooner. With the Federal Reserve, the booms and busts are much more stable. There are 2 videos that some might find informative and handy to share. This latest boom-and-bust looks an awful lot like an Austrian Business Cycle. I will explain further if challenged, but prices convey vital information to producers, consumers, workers, … A nonpartisan organization called Citizens to Retire the U.S. Penny has attracted the support of economists from Harvard and Wake Forest University. The video thinks Hong Kong doesn't have a central bank today. Pros/Cons to the Federal Reserve? Washington, DC 20002. The Federal Reserve Hurts the Poor and Middle Class the Most Senator. Pros and Cons of the Federal Reserve. Help stop the Democrats’ socialist Green New Deal by signing the petition. Now...with all this talk about ENDING THE FED, or maybe even AUDITING the FED? They don't seem to have a good understanding for how market frictions can affect outcomes. Wow...you are a complete idiot...or simply paid to post such utter BS. 7. It's far more difficult to make a run on a central bank with a printing press. The federal reserve has the word “reserve” in there. Very important: banks are used in the loose sense here. Customers have BANK PANICS, that the FED is designed, and authorized to PREVENT. A credit bubble rightfully received some of the blame for the financial crisis in 2007. Consider the Diamond-Dybvig model. Pro 1 Raising the minimum wage would increase economic activity and spur job growth. Suppose people can invest their money into a 2-year project that pays back (1+R) for every dollar invested. The Federal Reserve Encourages Deficit Spending Overall, the reasons I'm giving might make you want to think of things from a different angle. 4. If they do, suppose they will receive back just their initial investment. Oh, so, you're saying my Boss is Dick Armey... Well, last time I checked, Ken, I didn't see hide nor hair of him anywhere NEAR my workplace, or ANY of my workplaces in the last 34 weeks and 1 day since you left this comment. There may be something to the ABCT, but Austrian methodology is problematic though. Our money supply has rapidly increased over the past century due to the  Federal Reserve printing massive amounts of money like there is no tomorrow. And there was GOLD or SILVER in it! Do you read papers or attend research presentations? The Federal Reserve Routinely Bails Out Big Banks. The expansion of credit cannot continue permanently which means that inevitable bust will follow a false boom created by the Federal Reserve. Judging by the constant insta-polls the MEDIA does...at around, oh.... 9%. The seven members appointed by the president and confirmed by the U.S. Senate who serve for one nonrenewable 14-year term. It gives every state, no matter how small, a say. If they owe $100,000, that amount stays the same if inflation increases from 2% to 10%. 10. 1. 24, Key Vote YES on the Nomination of Judy Shelton to the Federal Reserve Board of Governors, FreedomWorks' Member of the Month for September 2020: Sen. Rand Paul (R-Ky.), Support the Federal Reserve Sunshine Act, H.R. The economy has been less stable since the introduction of the Fed, not to mention we've had a currency devaluation of around 98%. Voters can put pressure on their representatives to halt politically unpopular tax hikes and lenders could stop loaning money to the U.S. government. And they like the idea of THE PEOPLE being the distributors of that MONEY! Otherwise, ANY ISSUE of CURRENCY Congress could just "create and spend" into circulation...would run the risk of being viewed as "running the printing press," just like you're accusing the FED of DOING... Plus they're also requests from BANKS to have "MORE CASH" on hand, to prevent RUNS on the BANKS.... ("December 21, 2012" or what many think the Mayans said was the "END OF THE WORLD" is probably a GOOD WORRY customers have, for, needing "cash in a mattress, somehow" 24, if he or she hasn’t already done so. 8. CONGRESS ALSO regards them as "FOREIGN! I started typing a response but then thought screw it, i'll link you to this site instead. That kind of central planning would never exist in a true free market economy. 1. The closest the US, or the Western world, has gotten to an "Austrian Economics" system was the 1800's to early 1900's. They seem to believe that businessmen have rational expectations on just about everything except for how governments set interest rates. What it MORE IMPORTANTLY SET UP is that CONGRESS NEEDED AN "OTHER" to interact with, AND THAT "OTHER" to DISTRIBUTE, whatever product, the interaction between them creates, so that any THIRD PARTY, operating within the JURISDICTION that was not involved in the process, can recieve them as payment for GOODS and SERVICES, and CONTINUE the CIRCULATION of that product... All that the Framers did in US CONST ART.1 Sec.8 Clause 5, was set things up so that the OTHER could come and interact with CONGRESS, and be the DISTRIBUTOR of any PRODUCT. The Fed is led by seven presidential appointees called the Board of Governors. (For more discussion of the pros and cons of Fed independence, see here; for more on the degree of the Fed's independence in the U.S., see the bottom of … Their responsibility is to control and supervise the money supply and the banking of the United States. The temptation once you have a reasonable sounding business cycle theory is to see it anywhere and everywhere. ", And here you're scratching your head, saying "WHAT?". My case for why the Federal Reserve should be abolished. The Federal Reserve System consists of twelve Federal Reserve Banks located throughout the United States. Pros and cons really depend on a personal preference on what type of monetary policy the U.S. is looking for. Or maybe inspecting the fluctuations of your bank accounts? But it’s fast and easy for the Federal Reserve to print more money at a whim. You must have JavaScript enabled to use this form. But abolishing the Fed only raises the bigger issue: What would—or should—be in its place? Ron Paul has stated that his preference (if we were to start over) would be that there is no Fed, but he understands that we are somewhat dependent on it at this point, so stressing transparency and accountability is the best way to limit the power to what makes sense. Historically, this is actually false. The Constitution makes no mention of a central bank. As long as the number of people withdrawing their money early is small, then they can fund the investment and pay early withdrawers more than just their initial investment. Do you understand the way economists build models? 2. Let's say you could press a button, and POOF! WASHINGTON, D.C. -- In response to the Federal Reserve Board’s decision to cut interest rates close to zero, John Tamny, FreedomWorks Foundation's Director of the Center for Economic Freedom (CEF), commented: It is no secret that limited-government proponents dislike the Federal Reserve, or “the Fed,” and the influence that this central bank wields. If the Prime Rate goes up the stocks drop, and the Prime Rate drops the stocks go up, if the Prime Rate stays the same the stock do nothing. What do you mean "wrong"? The National Popular Vote Interstate Compact (NPVIC) is an agreement among a group of U.S. states and the District of Columbia to award all their electoral votes to whichever presidential candidate wins the overall popular vote in the 50 states and the District of Columbia. This is called 'sound money.'". Representative Jim Kolbe of Arizona has twice introduced bills in Congress to eliminate the penny, and in February 2014, President Barack Obama argued during a YouTube chat that pennies were obsolete and a symbol of U.S. government waste. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York. Inflation is the increase in the supply of money and credit. Nothing is going to be immune to a bank run, but the point of insurance is to reduce the odds. The Pros and Cons of Greed. The duped people of the United States are paying about $400 billion dollars per year to the IRS which is the collection agency for the Federal Reserve. I do not believe that inflation should be used to achieve these distributional ends, but these are the facts. Pretty pathetic how some Americans are so indoctrinated into the corrupt system that they can't see past their own ill-informed egos. I know that a lot of folks reading these comment pages here, want a return to the COINAGE ACT...where a DOLLAR was REALLY A DOLLAR! “Petitioners, sentenced to die for the crimes they committed (including, in the case … Special interests receive access to money and credit before the harmful inflationary effects impact the entire economy. What could not be more secretive currently, though, is the way that the Fed operates. FreedomWorks is proud to roll out its 2020 policy platform for the Republican Party. Become a member today! With record rates of deficit spending and a record-shattering Federal Reserve balance sheet, it should be no surprise that the dollar’s value is at an all time low when compared to the value of gold. No matter WHAT YOU THINK it says, (or think it ought to mean)...CONGRESS CANNOT be COINER of COIN and DISTRIBUTOR of that COIN, SIMULTANEOUSLY...(there's a Check-and-Balance violation against the PEOPLE, there.). Reestablishing policies that will stabilize our currency and promote prosperity in every corner of America is the surefire way to achieve such an end. So lets’ start there. They assume that the market always reaches the optimal allocation, and the only thing that can prevent this is the government. This includes governments and most firms. Inflation affects people who hold onto cash, and the poor tend to spend money that they earn in short order. Tensions rose across the country from those in support support of slavery and those opposed. Some countries use the death penalty for repetitive violent crime, such as rape and sexual assault, or for specific drug offenses. Basically, people who don't like the Fed can get out, and people who like it can stick with it. Risk-averse people would prefer an arrangement where the people who pull out in year 1 receive a bit more than their initial investment, in exchange for people who stay in for the full two years getting back a bit less than (1+R) for every dollar. On behalf of FreedomWorks’ activist community, I urge you to contact your representative and ask him or her to cosponsor the Federal Reserve Sunshine Act, H.R. Kapt.Blasto, which part of Unconstitutional did you not understand? They can guarantee that the bank will have enough money to pay everyone back. This makes the government uniquely suited to providing these functions since they can print money. In the current economy, the bust is stabilized as debt is slowly liquidated, but this is at the cost of a banks receiving money through quantitative easing, more debt being created, and the risk of a pending hyperinflation. When the Congress does this, it will own back the billions of U.S. Government Bonds held by the FED. So where did you shovel up you're Instantbull from? 9. 1. You can use our key vote scorecards to see how they measure up. And that is the State where the Laws are either NON-EXISTENT, or so lax or vague that the law would exceed the point of UN-enforceability... And that is precisely the State where the SIGNOR of the CREDIT CARD CONTRACT...gets their signature RECOGNIZED...turning what SHOULD BE a LOCAL INTERACTION, into an INTERSTATE interaction... and the poor Schmuck that just signed the loan, can complain all he wants to his STATE assembly... And the STATE GOV will have to say to the Schmuck, "Hey SCHMUCK! The Chase Manhattan Bank is a member which is owned by the Rockefellers who are Rothschild Agents. The Federal Reserve is Run By Unelected and Unaccountable Bureaucrats. Maybe one can direct me to a previous post if this question gets asked ad naseum. The Federal Reserve Has Significantly Devalued Our Currency The Federal Reserve acts as the lender of last resort. (unless of course, Congress wanted to take over the CARD-making industry, to chisel out the guys that are making that money from the banks, and they figure they go work for the GOVERNMENT and do the same thing they were doing before...I'll bet you complain about GOVERNMENT getting too large! [Click here to see a PDF version of this report. Edit: Didn't read your text, just the opening question (my bad). It was not fueled by cheap credit since most of the investment wasn't leveraged heavily. The Federal Reserve is Unconstitutional. Further, there is a serious risk that real-time auditing of the Fed's financial contracts would weaken the financial system during times of crisis: that's why the Fed's lending window has always been anonymous. The Internet boom and bust, which was small by comparison but still significant was probably not an Austrian business cycle. In retrospect, these investment decisions called malinvestments are seen as a bad allocation of resources. Ron Paul actually stresses for audits of the Fed, not to abolish the Fed, which is perfectly reasonable. They tend not to recognize the feedback effects in a macroeconomic model. An era synonymous with corruption, poverty, and unstable economic growth. It is a way to provide justice for victims while keeping the general population safe. The Board of Governors at the Federal Reserve are not directly elected by the American people. The question is “can you survive for long without the Fed”. Here's a discussion of something similar a few days ago. The power to create a central bank is not explicitly granted to the federal government in our founding document. Read parts 1-6 and you'll have an excellent understanding to your question. The video states there are examples of countries without central banks. The market then decides what's better (if one is). An unexpected increase for inflation for a great many poor or middle class people would probably be beneficial. It is incapable of accomplishing its stated objectives as to maintain stability of the financial system. I have 2 main contentions against the proposition that the Federal Reserve should be abolished 1: The Federal Reserve bank is necessary to maintaining price stability. Make illusory nominal gains through interest or capital gains. They don’t do econometrics to estimate which factors are actually significant. as for any foreign entity stepping in, that also would be Unconstitutional in a sovereign government and measure are already in place to keep it from happening. Gee, I Don't know, Kenny...how much your masters pay you for your one-liners, here? The US Congress can even bring the dead back to life. ], 1. 1) Why would you want to go after an institution, that some could figure is being SET In July 2011, due to a provision under the misguided Dodd-Frank financial overhaul law, the Government Accountability Office (GAO) conducted a one-time, watered-down audit of the Federal Reserve. This limits the independence of the Fed and makes it more susceptible to political pressure, which economists generally agree is a bad thing. It is harder to say that the interest rate was too low since we have no idea what the market rate of interest would have been. It is permitted to create as much money as it wants out of thin air with no restrictions. The price of labor (wages) tend to rise with everything else so inflation doesn’t erode the earning power of wages. Our government predicts this, which is why, as a whole, the U.S. government encourages Americans to let the Federal Reserve do its thing. Well, maybe it's better you don't call the caterers yet. Suite 600 These bailouts happened without a single vote taking place in any chamber of Congress.   Pennies are made of zinc and copper. Economic arguments remind me of philosophy ones... but with some math thrown in. It isn't *necessarily* authorized to prevent INFLATION, per se...but BANK PANICS...DEFININTELY....), (plus, if you'll remember past reports regarding 90% of the physical PAPER currency, having ILLICIT DRUG RESIDUE upon them? This is what will almost inevitably happen when a quasi-governmental entity can simply print more money to its heart’s content. The most famous role of a central bank is monetary policy.