www.bankaholic.com/2008/federal-reserve-is-failure -> www.bankaholic.com/2008/federal-reserve-is-failure/
gif No single quasi-private institution has as much influence on the worldwide economy as the Fed, and as a leader can head this institution for an indefinite term, no one man is as influential on the markets as the Fed Chair. The Dollar has plummeted in the currency markets and shows few signs of recovery or even stabilization. The new style and policies that accompanied Bernanke into office have made the Forex markets more volatile than ever and even more difficult to predict. An examination of what has gone awry can help Forex traders understand this new era at the Fed. Since as early as 2001, at least two senior officials inside the Fed urged its board to call for tighter regulations in the housing markets, especially in abuses that were clearly evident in the handling subprime mortgages. At the time, the White House was singing the praises of America's new society of ownership, so the Fed took this cue and did nothing. These deceptive loans were making possible the dream of home ownership to millions of Americans, even to those who could not come close to affording it. Now these same Americans are living through a nightmare of foreclosure and debt, much in thanks to the Fed's willingness to ignore long-term repercussions and revel in immediate accomplishments, no matter how hollow and transitory they might be. Instead, Bernanke procrastinated, and when he did finally announce a cut, it was insufficient and ineffectual, at best. On December 11th, the Fed dropped its benchmark rate by a quarter of a percent rather than the half of a percent that had been called for by analysts and investors. Wall Street promptly responded, as the Dow plummeted nearly 300 points in one day. The Fed might argue that this cut was prudent and that a more drastic cut would have unnecessarily fueled a rise in inflation. However, many view the Fed's temerity in this matter as merely an extension of its inertial proclivity towards inaction. Greenspan's long tenure at the Fed was defined by a tendency to aggressively cut interest rates, which he began to do frequently in 1987 after the drastic correction in the stock market. This initial move helped stave off disaster, but the further rate cuts of the late 1990s eventually led to the dot-com bubble. if this had been done, the US might have avoided the furious borrowing that has led to the current credit crunch. The soaring costs of food and energy are a phenomenon is the US and worldwide, but the Fed does not take these developments into account. The Fed's analysis focuses on "core inflation," which excludes a number of indices that it views as transitory, including energy and food costs. "Headline inflation," which does take these costs into account, is favored by European economists, who view high energy prices as a long-term trend. By choosing to disregard the rising costs of a barrel of crude oil and a bottle of olive oil, the Fed is ignoring reality. The majority of financial stocks have suffered of late, and justifiably so. However, the Fed seems dedicated to bailing out even the worst of the perpetrators with the recent set of economic interventions that it has enacted. While working to eliminate any downturn in the market might seem feasible for short-term success, it is a purely shortsighted endeavor that will hurt the economy in the long run. In order for a free market to truly exist, bear markets must coexist peacefully with bull markets. Unfortunately, the Fed has its bright orange vest on and is going bear hunting. This is a doomed outing, and one that is going to get us all hurt in the end.
Mark Argentino said: on March 20th at 02:04 pm Good article. In point 3 above, I don't agree that the low rates caused excessive borrowing. Greed is always in play, people just overextended themselves, just as they did in the late 80's when interest rates were at about 12% All the best!
The fed never really did much to begin with, not to mention it is neither "federal" no is it a Constitutional entity. The devaluation of the dollar since 1913 speaks for itself.
suziee said: on March 20th at 06:38 pm nice article, can i put it in my blog ? i will give backlink 5 Bankaholic said: on March 21st at 02:45 am Suziee, yes, please put it on your blog and spread the word about our horrible monetary system.
Gary S Goodman said: on March 21st at 06:08 pm With oil prices soaring and more resources headed to duplicitous regimes and to their terroist parasites, we're doing something rational: We're devaluing the currency. The Fed is paying lip service to fretting over inflation. Through bailouts and rate cuts it is promoting inflation. What's missing from our national policy, Fed aside, are two things: A meaningful incentivizing of alternate fuels and conservation; Now, we're in a war for oil, and we need to assure our supply as we pursue alternatives. Oil is neither in short supply nor expensive, but our "free market" system requires we pay $100 a barrel for it. Obviously we are getting ripped off by privately run oil, and don't blame taxes, which are only about 15% of the cost of gasoline. The final failure is the fed's dropping of interest rates, causing CD prices do drop, discouraging investment capital which is exactly what banks need at this point in time!
Mark dela Paz said: on March 25th at 02:02 am Very well written and something I generally agree to. Thanks for bringing this to my attention, I'd be sure to mention it in my lectures. timotato said: on March 26th at 03:56 am Maybe I'm pessimistic but it seems clear to me that your point number 6 should be "The Fed doesn't give a darn about us because it's a private entity". David Rockefeller and his cabal have been playing us for fools. There's no mystery why the Fed hasn't "kept on top" of our economic situation. They knew the sub-prime loans stank and sta back and watched the result. They're shaking out the weak & greedy then buying them up at bargain prices. thus issuing Chase a $30B unnecessary and unneeded gift of OUR MONEY. In essence David Rockefeller just gave himself a gift of our money. The word "quasi", as in quasi private, doesn't mean jack when it comes to greed and making money. It only looks out for us when our interests are in common.
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