Get the Federal Government and Federal Reserve Out of the Way
by William Shughart IIEconomists and pundits, who contend that the Federal Reserve System has little room to maneuver in using monetary policy to jump-start our anemic economy, often have claimed that America is mired in a Keynesian “liquidity trap”, a situation in which the demand for money is unresponsive to changes in market interest rates.
After all, those commentators emphasize, the Fed has adopted a target for the federal funds rate (the interest rate charged on overnight interbank loans) of between zero and 0.25 percent. The implication is that further reductions in that rate will have little or no effect on the incentives of businesses to invest in new plant and equipment or of consumers to borrow in order to finance the additional spending necessary to raise GDP growth above the (recently downwardly revised) estimate of 1.6 percent during the second quarter of 2010.
But those commentators overlook or ignore the easily verified reasoning of John Maynard Keynes, who defined a liquidity trap in terms of long-term rather than short–term interest rates. The long-term (ten- or 30-year) rate on Treasury securities now runs at about three percent, meaning that the Fed still has arrows in its quiver. Unfortunately, however, those arrows, the use of which would demand the central bank engage in further “quantitative easing”, requires it to purchase more under-performing, “toxic” assets from banks and other financial institutions that lent money to homeowners who could not repay their mortgages. Engaging in such transactions places more bad debts on the Fed’s balance sheet, constrains its ability to conduct monetary policy in the future and raises the specter of higher rates of future price inflation.
In his recent speech at Wood’s Hole, Wyoming, Fed Chairman Bernanke was right to say that economic recovery cannot depend solely on the policies of the central bank over which he presides. But the fiscal discipline (spending and tax cuts) required to achieve that goal is incompatible with the vote motives of incumbent politicians or their challengers for political office.
In consequence, the United States will not return to genuine economic prosperity for years to come. Americans ought to be grateful if a “double-dip” recession is the only price they are forced to pay as the result of recent monetary and fiscal policy choices. It would be far better to make the Bush tax cuts of 2001 and 2003 permanent, to reduce the tax rate on corporate income and estates to zero, and to limit government at the federal level to the powers granted to it by the people and the Founders of our compound republic.
America will be able to reclaim the path to prosperity only if the federal government and its central bank get out of the way.
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76 Comments
And the socialist radicals out of the country…..That would be a good start.
America will only recover if we return to our roots!
It would be far better to make the Bush tax cuts of 2001 and 2003 permanent, to reduce the tax rate on corporate income and estates to zero, and to limit government at the federal level to the powers granted to it by the people and the Founders of our compound republic.
But that flies in the face of the whole soak the rich and equal distribution of misery agenda of the left. Can't have that, now can we? After all, the rising tide may raise all ships, but if we scuttle all those ships, they're all at the same level, too. Right?
This article points to a larger problem that we have to come to terms with: the reality that the Federal Reserve System Act of 1913 and the commercial banking system of the United States no longer work for us and we are now realizing that these measures never really did. These systems were designed by the banking industry for the express purpose of creating a federally-sustained monopoly in favor the banking industry and its allied institutions of the political-class.
Make no mistake about this: they created it for their exclusive benefit and the costs to everyone else have been extraordinarily high. In point of fact, the system can be easily changed for something that will work and will make bankers even richer, but also allow the rest of us to accumulate wealth.
You think you know all there is to know about banking, but you would be wrong. Can you imagine a loan that doesn't come with a payment book? No monthly payments? Guess what? They exist, but you don't see them because self-liquidating loans would end the commercial banking system's monopoly on credit and wealth, but that doesn't make self-liquidating loans any less viable.
You think you know all there is to know about our economy, but you would be wrong. Can you imagine an economy where recessions can't happen? Guess what? We can structure our economy so that this is the exact outcome that cannot be avoided, but if we do that it would end the banking industry's monopoly on credit and wealth, so don't look for them to endorse anything along these lines.
You think you know all there is about creating money, but you would be wrong. Can you imagine a system where there is no Federal Reserve trying to guess how much money to put into the economy and an end to our trillions of dollars of unfunded liabilities and national debt? We can have it any time we want and the structures exist.
First we have to admit we need to change things, then once you have admitted that you are ready to really enjoy free-market capitalism, we can talk about what can be done so that true opportunity and freedom is part of every American dream – a dream that doesn't include the nightmare scenarios of communism, socialism, totalitarianism, fascism, feudalism or the continued failures of the Federal Reserve System.
When you are ready, we'll talk and you'll be amazed how easy it can be.
Just yesterday I gave a lecture about our Keynesian experiment – "your great grand children will be picking up the tab"
From the piece…
"It would be far better to make the Bush tax cuts of 2001 and 2003 permanent, to reduce the tax rate on corporate income and estates to zero, and to limit government at the federal level to the powers granted to it by the people and the Founders of our compound republic".
Doing these these simple things, is a no brainer,…exactly why Obama WON'T do them…
"In consequence, the United States will not return to genuine economic prosperity for years to come. Americans ought to be grateful if a “double-dip” recession is the only price they are forced to pay as the result of recent monetary and fiscal policy choices."
My descendants will be paying for this debacle, four generations from now. It is abhorrent what we have done to this Nation. I say WE, because WE were complacent, and WE allowed it to happen. Each and every one of US who has ever voted, shares the collective responsibility.
The Gravy Train is off the tracks.
Time to start eating Alpo.
And here I thought these people were supposed to be smart. So why do they think they can spend their way out of debt?
And wasn't the Federal Reserve supposed to be 'independent'?
The destruction of our monetary system through the Federal Reserve and the radical transformation of American culture through large-scale LEGAL immigration are the two biggest problems facing this nation. All other issues are just window dressing. Small cuts in government discretionary spending here or there pale in comparison to the destruction caused by the Federal Reserve.
another Right wing nut proposing an idea which will never be a reality. Time to return to a socialist democracy like MLK jr said
" My descendants will be paying for this debacle, four generations from now. "
I fear that it will hang over the head of many generations.
My real estate friends tell me interest rates are extremely low, but only those who don't need a loan can get one. The business I am in has our clients leasing equipment. Where we used to approve roughly 90% of our prospects, we can only approve roughly 55% and that's up from 45% when the world crumbled back in the Fall of 2008. Combine this with businesses sitting on their cash reserves and no longer investing, you get this double dip recession.
Nothing's changed including the idiotic policies that this POTUS pukes up.
We were never a socialist democracy, and socialist democracies never work.
LJ, can you support a system that wont lead to failure.
I am still praying God will deliver you from your stupidity.
Oh, No Bama was borne in Kenya.
Virginia 7th District for Congress, Vote for Floyd Bayne. He's our best chance at a limited government.
http://floydbayne.com/
Contact me at kcsfarm2007@yahoo.com if you would like to meet him in Rockville at my rally.
Part of getting the government out of the way and really reducing the budget would entail the wholesale elimination of agencies, which would be an excellent result.
And yet there will be more who will make the case for it: "this time the right leader will make it work" – as if you can pick and choose which government expenditures are stimulative and which ones aren't. I am amazed by the dogma that says defense expenditures aren't stimulative and non-defense expenditures are even though defense expenditures would seem to fit the goals of their stated model as the military requires heavy industry output to sustain it, while putting money into union pension plans is a stimulus and spending $65 billion to save 55,000 jobs (at a cost of more than 17 times the cost of creating a job in the private-sector economy) is somehow a stimulus.
To believe it is to believe the empirical evidence of the actual outcomes of our economy in the modern era is somehow counter-intuitive. Indeed, if government spending was really efficient would not the evidence be (over time) of less government spending being required and government shrinking itself as fewer and fewer households and businesses required a stimulus to become part of the productive-side of the private-sector economy? Yet we see the opposite and that is because every dollar of spending has to have a source and as long as government defines its role endogenously in the private-sector economy, that source will be us and your great grandchildren.
Eliminate the IRS and 70 thousand pages of tax code. Repeal the power to tax incomes.
End all federal taxation and fees on individuals. At the same time, each state and local legislature rescinds all taxation and fees.
Each state then imposes a 23% tax on all purchase transactions. Seller collects and remits this 23% to the state which in turn FIRST funds all local governing bodies and then funds the federal government the states created.
Business would boom, people would be paid what they are earning and the power of the America economy would be returned to its rightful owner. WE THE PEOPLE!
You want a 'socialist democracy'….go visit Hugo Chavez!
"Time to return to a socialist democracy "
When was that? Maybe you're referring to the socialist democracy that existed in Germany prior to the rise of the Nazis. Or, maybe the socialist democracy that existed in Spain prior to the fascist revolution. Socialist democracies always fall under their own weight and lead to desperate people turning to totalitarian regimes to restore some semblance of order. Not a scenario that most people want to see happen here in America.
"The first two Federal Reserve Systems lasted about 20 years each and we are now almost a hundred years into the third one."
In December 1913 while many members of Congress were home for Christmas, the Federal Reserve Act was rammed through Congress and was later signed by President Wilson. At a later date, Wilson admitted with remorse, when referring to the Fed."I have unwittingly ruined my country".
We didn't have nor did we need an income tax until we got the bankers back. The income tax was only needed to pay interest to the bankers for our money that they loan to our government…Our taxes pay them interest on this loan that cost the FEDS virtually nothing to make, what a sweetheart of a deal they have going for them.
Talk about an idea that will never be a reality. Return to a socialist democracy? BWHAHAHA!
Dude, your latest batch of crack must be tainted, because your posts keep getting dumber and dumber. At least your racist bigotry shines through on a topic about the Federal Reserve. You have a tradition to uphold.
By the way, there is a LOT of discussion about getting the Fed under control. So this proposal has a lot more merit and validity than anything you post. Of course, whale dung has more merit than anything you post.
That is exactly it rck, the way to beat that monster is to starve the beast.
I have been looking at refinancing. 2 yrs in on a 15 year loan at 4.75%. Rates on 15 yr loans are now at 3.75% or so. Looks like a no-brainer, however I will still have my current loan paid off before I could have a new loan paid off (if I continue paying the same each month on a lower payment). So, no deal. However my refi-guy will keep his eye on the rates and will revisit if they go lower. I may be able to get a 10 year loan at such a low rate I cankeep my same monthly payments… we will see.
Point is (finally)… I expect the rates to continue going down as the economy 'pukes'.
Some good review articles about what a disaster the Federal Reserve is. WSJ essentially calling for the same thing proposed here.
http://online.wsj.com/article/SB10001424052970203...
http://mises.org/daily/3518
http://mises.org/daily/3348
How does one kick start the economy?
Simple solution… Put money in the hands of consumers! How do you do that??? Not with a 'stimulus', which goes to corporations, politicians, states, etc… You do it by reducing spending by government and reducing and/or elliminating taxes!
This concept is too difficult to comprehend by progressives.
Were has a socialized democracy ever worked?
Better yet where has a democracy ever ever worked?
Have another sip of that joy juice dippy. Why don't you lay out the economic plan for recovery? Socialism…really!
What you are missing is a trip through real history books. Give me one example where a socialist economic system worked. Be sure that you cite valid souces. Wiki anything will not fly.
If you can't, shut your flapper and do some research.
The lack of logic is remarkable. The basics of microeconomics tell us that If we want to sell more goods, we lower the price and increase the desired qualities in the goods. Likewise when we need more tax revenue we lower the rate and make sure it is only spent on essentials. Instead, our government decides that just the opposite will work. The experiment will fail as it always does. This is like the parent that lets their child do stupid things (like play with fire) so they can learn a lesson only this time the price of the failure is unacceptable (the house burns down).
America has never been socialist democracy. That's what they're trying to make it, but we are too broke to go there now. If you want a socialist democracy, I suggest any one of a number of Western European countries.
Limit the 23% to all consumption purchases and I'm with you. Do you realize how expensive things would be if every raw material going into it was taxed at 23%? How many steps do some of those products go through?
Farmer sells to grain company – 23%.
Grain company sells to feedlot – 23%
Feedlot sells cows to slaughter – 23%
Meat goes to grocer – 23%
Grocer sells to you – 23%
That's a potential 115% tax we'd be paying on our steaks, roasts, and hamburger not counting in the tax costs that would be passed along from other products used to bring beef to market – medications, labor, etc.
Whenever we talk about fixing the economy and government, all the left sees is "cut taxes." They willfully ignore the part about cutting government spending. Without doing both in a realistic and purposeful fashion, we'll never climb out of the debt hole.
There is a shortage of lending because government is swallowing up all the available credit in their search for economic relevancy. Indeed, the prevailing wisdom on Capitol Hill is that their spending helps when it cannot be that way due to the structure of the economy. All spending has to have a source and that is the lesson that is being learned again and again.
Sounds good, but won't solve the problem and prevent the doom that our spending habits make unavoidable in your construct. If you want a different outcome you have to be willing to do something different. I applaud your idea of ridding ourselves of the IRS, but the resulting plan would only make the demise of our economy and way of life just as unavoidable as the plans of the liberals – just take a wee bit longer.
Return?….. you're pulling that one out of your a$$ and it stinks.
My country never was a socialistic democracy. Here, watch this and tell me different: http://www.youtube.com/watch?v=rXTiMLSYXF0
You never will. History tells us the liberal elements of every government in the history of mankind destroy the economy and the government falls as soon as they realize they can vote themselves unlimited gifts from the treasury.
Remember: as long as you are going to address an unlimited activity with a limited resource the outcome will always be a failure. Sooner or later (and now it is very much sooner) you spend too much and the economy dies. You can't limit spending, so you have to change the way you pay for it so that the resource is just as unlimited in nature as the penchant for spending. Believe it or not that doing that actually results in government spending less and shrinking itself. I know that sounds kind of counterintuitive (even kooky) but the laws of mathematics and Rational Choice Theory only work one way.
It's even worse than that, but I applaud your passion and hope more people take up your banner.
"your great grand children will be picking up the tab"
This would be logical, if not for the declining birth rate. Take a quick look at what is happening in Europe — they are ahead of us by fifty years or so. Our "great grand children" will not be paying this bill for the simple reason that they will never be born in the first place.
Time to stop deluding ourselves, end this nonsense and turn the country over to its rightful owners — the Chinese!
Maj.Gen. Jerry Curry : Obama's Eligibility Issue Moving Toward Critical Mass http://www.youtube.com/watch?v=1TmTqvIhLig
One problem facing any economy is when it reaches full capacity and becomes an economy of replacement. This topic was never discussed when I sat in econ classes at university. I don't know if it is even being discussed today. However, it can lead to high tariffs, international squabbles, and even war, especially when nations try to force their way into emerging markets where competition is fierce for market share and resources. Look at what is happening today.
Another unanswered question was how 7% of GNP(deficit spending) could so negatively effect the rest of our economy. Yet, in the early seventies during the first oil embargo, our economy was staggered by the alleged shortage of oil which later was shown to be a farce. It was nothing more than a contrived measure by OPEC and the "7 sisters" in an attempt to force oil prices upon the American public equal to those in Europe. Then and there our congress should have initiated legislation to guarantee our independence on foreign oil by increased drilling and the construction of more "cracking" plants.
Cont. below
"The central bank is an institution of the most deadly hostility existing against the principles and form of our Constitution."
Pretty strong words. Thomas Jefferson said that, and maybe he simply woke up on the wrong side of the bed that day—but I'm more inclined to believe he was speaking the truth.
This White House is rudderlessly lost at sea and inadequate to the challenges it faces.
OPPOSITE MAN = BHO, your facts, FACT: Progressives are frantically trying to explain away Obama's problems. Job Approval Only 41%. Economy Only 38% Approval. ObamaCare Only 37%. Country right direction less then 32%. Some want to protect their investment in Obama, and some want to protect their investment in liberalism. So some claim that his mistakes stem from not being progressive enough, while others insist that he's played his cards right, but we need to wait a bit longer for the payoff.
But, again, that's an argument for a different day. What's clear right now is that the president who claimed to be the personification of a world-historical moment has clearly misread his mandate, the mood, and the moment.
Nonviolence is a powerful and just weapon. which cuts without wounding and ennobles the man who wields it. It is a sword that heals.
Martin Luther King, Jr.
Remember November,
http://remembernovember.com/
Yet, spin city east nothing did nothing. It appeared that the "do gooders" in congress and other agencies saw this as a way to aid underdeveloped countries. Boy oh boy, was that a scam.
Our deficit today is based in great part on the failure of government to back off and allow the market to adjust normally to supply and demand through direct competition. Too much government regulation and tax stifles business. It impedes or strangles competition, development, and overall the consumer from getting the best bang for his/her buck.
Would you shut up, please? Someone as easily led as you might believe you.
Once again this dimwit makes some brash and ignorant statement and doesn't bother to qualify it in the least. Whatever the prog sites are paying it, they are flushing money away. I don't imagine much of a brain trust on that side anyway. They don't really have any examples to draw from save their holiest of holies, Saul Alynski.
"We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution." – Abraham Lincoln.
Forgotten again, and again is more like it.
The left has cornered the market on denying the truth.
Better yet-ban the Fed entirely, repeal the 16th amendment,repeal the 17th amendment. Put term limits on judges, especially the USSC. . Jutices should also be able to go thru a peer review procedure.
Gb-remember Andrew Jackson-he took money and spread it to regional(the media called them "pet banks") banks so that one overreaching Fed Reserve bank couldnt strangle the country. Remeber the first "panic" in the economic history of the USA? Jackson stopped it by his establishing his "pet banks". he destroyed any early chance to ruin the Americab economy by the far left of his day.
Isn't that how all this started? The ignorant taking what ever a politician or reporter says as the absolute fact and final authority on what ever subject they are talking about. LJ is most likely trying to just imitate the chuckle head that he is so willing to follow blindly, the willing suspension of reality in their minds.
One thing you discount, or miss entirely, is that multiple taxation occurs now and is already built into the price we pay at the end. Make no mistake, costs of doing business are already passed along – one way or another. Think subsidies and tax loopholes. On this note, when taxation compliance costs are reduced, so too can the prices be.
It may be true that something along the lines of 17% or even 14 % may be more appropriate. That would have to be debated and adjusted as the process unfolds.
Rainmaker, I wouldn't disagree that spending habits must be addressed. However, I offer to you that when everybody is paying taxes, the same taxes (not the same amount), the game of getting the poor to game the rich comes to an end. No longer will congresscritters have the class card to play because people will understand that it is THEIR money being spent – instead of grasping onto the idea that it is money that belonged to someone else.
In a nutshell,. changing how government gets money will lead to a change in how it spends it.
rainmaker, on the even worse front, folks talk about money being printed when the real conversation there must be how much paper money is being destroyed.
Additionally,
I am all for ending the fed, at least as it is today. I am fine with fractional lending as a business risk, but leveraging being done today is a far cry from such a thing. Personhood must be honestly defined and the government of these united States must be a constitutional one, rather than the corporate United States "government" we have today.
I will go so far as to say I am OK with a "central bank" – BUT – and it is a big but- all dealings with such an independent and private institution by our federal government must be ABOVE BOARD and OPEN for all to see. Transparency puts an end to shenanigans.
No, I don't discount our current rate of hidden taxation which is also too high. I merely think that taxing something at every step in the process is a heavier tax than you might be thinking. A Fair Tax taxes only those things directly consumed by a person or business in their day-to-day operations and would not tax things being purchased to make a product they sell directly. It would lessen some of those levels of taxation I mentioned above.
Or, a Flat Tax rate where everyone, regardless of their status (rich, poor, business, private individual, etc.) pays exactly the same percentage of their income in tax either would be more transparent and much simpler and allow for the abolishment or severe constriction of the IRS.
I would go further with one step. Anyone below a certain income level has the right to voluntarily opt themselves out, but they give up their right to vote in so doing.
No representation without taxation.
You need a new avi pic. May I suggest:
http://www.tfhp.org/images/kutcherside.jpg
G F Y
As intelligent as the rest of you "posts" here…
Your "birther" bullshit is a dead issue. All people like you accomplish is providing the Lefty moonbats something to ridicule the Right with. Thanks for your "contribution"…
CNN poll 58% think he was not born in the US or not sure.Gee some fringe.I Have no more time to chat with you I am too busy carrying my weight and yours. TY
I'm "not sure" either, but I know a pointless, losing issue when I see one. You are creating, not carrying weight. Keep feeding the Lefties genius…
Oh, and yes -I have watched several of the links you have posted. Worthless. Not changin' anything. Waste of time…
But what would we do with all the empty college lecture halls>>>>? /s/
They fear this issue above all others.I have already been told if the GOP takes congress a lot of the people who got Clinton impeached in the House are going to go after him (O) on this issue and others.
TERM LIMITS for ALL, incl. Judiciary. Re-institute the Constitution, instead of Obama's Re-education for socialism.
Leave Bush Tax cuts in place. No more Taxes or spending, or IRS.Reduce Govt. size by 2/3. Get Dems & RINOS out. Go with States Powers! Serve subpoenas on entire Obama Admin to make them explain their High Crimes against a Nation!
Investment Tax Credit, whereby profitable businesses get a credit against their taxes if they make capital expenditures. This would help modernize us, and thus make us more competitive on the world market. More higher-paying tech jobs would be created.
The Democrats would rather subsidize the wages for some fool working for non-profitable, manual-labor companies.
"The best thing we could do for the federal tax code is to set it at a reasonable level and NEVER touch it AGAIN!!! "
That suggests that the world, our economy, and our ability to pay taxes will never, ever change. It also means that if someone finds a loophole in the tax code, it couldn't be remedied.
"Mmmm, alpo!"
It's a shame Alexander Hamilton didn't get ran over by some stampeding horses back in the day.He's the first idiot to get our nation in debt to the Dutch.
How do you get out of the way of a 1000 foot wide steamroller!??
The code would be simple (so no loopholes) and the tax rate would be very low. States could raise and lower their state taxes as much as was necessary to accommodate their needs. What we can't and shouldn't have is an entity like the Federal Government jacking constantly with the tax code AND having the authority to print money. It is a dangerous mix because it creates a false sense of security for honest politicians and creates a "hen house" for dishonest foxes in Congress.
Perhaps we should go back to the original founding and not have any Federal income taxes at all. But I don't think our civilization could honestly handle that level of cosmic shift in the 21st century.
Businesses today would be willing to invest right now if they knew they count on the tax code not changing under Obama. It is the uncertainty of the tax code that keeps investment on the sidelines.
"It is the uncertainty of the tax code that keeps investment on the sidelines. "
That plus the fear of excessive regulation and other government meddling.
Agreed.
damn it!!! you make sense, therefore you must be shot at dawn…
this is what I know about banking…I have checks in my checkbook, that means I still have money in the bank…no I am not a scumsuckin' politician. what I know about economics is…if I don't have money I can't spend…
dismanteling the fed and getting the gubmint out of our lives is a MUST…so to make a long winded statement even longer…I agree with you WE NEED TO CHANGE THE WAY OUR MONEY IS HANDLED…
oh! let me axe you a kwestion…where is the gold that's 'sposed to be in Ft. Knox????
COWBOY…we got the gubmint we deserved!!! we allow those on the dole to vote!!!! some smartypants sumbitch once said… "if you are on gubmint subsistance no vote"…that does not include the aged, infirm, disabled…is does include the illegal invaders and their anchor babies, the brood mares popin' out babies from different daddies, and the ner' do wells…
in the short run…WE'S SKREWED!!!
there may be a chance we can recover but….if you're over 40…YOU'S SKREWED!!!!!
don't forget….we gittin' osamabama HELLSCARE!!!!
no ALPO for me…..MIGHTY DOG ruuuuulllllleeeeees!!!!!!
here is an idee that came to me during a session with the BONG…make any tax increase suggested by scumsuckin' politicians be voted on by the very folks that are footin' the bill…yeah yeah I know takes too long to get done…is that not a good idea?
All $300 billion of it is there, but don't fall in love with the idea of affixing the value of our currency to a precious metal or anything else having a finite quantity. It's sophistry: sounds good on the surface, but once you look at it on an in-depth basis you realize it won't work. Equity inflation sidesteps the entire issue and when you use the right kind of securities to undertake the equity inflation process, the value of the currency is protected and the requirement for a Federal Reserve System is completely sidestepped.
it's there??? are you sure??? you have proof??? yeah I sound like a 5 year old but…"show me the goldy"…I would send a happy face but this knock off computer I stole from AZDOC has a lot of keys that are just painted on…..
that depends on what the daffynition of reasonable is…is…are?
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