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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (72283)	12/23/1999 2:31:00 PM
From: Freedom Fighter	Read Replies (2) \| Respond to of 132070

BGR, >>If the Fed didn't make three hasty rate cuts, there would perhaps be a lot of former middle-class US citizens as well. So, the policy error, perhaps, was post the 1997 crash when it came to the S.E. Asian economies. The Fed needs to be applauded for its fine performance.<< >>(which averted a post 87 depression as well as handled the S&L crisis pretty well)<< You fail to appreciate the "chicken and the egg" aspect to this. Without prior easy credit (fiat) we would not have had those excesses to begin with. If you give a heroine addict a fix and make him feel better for a while are you really helping him? He will need another fix (and perhaps a bigger one) down the line. Of course "cold turkey" is difficult. But the idea is to avoid the excesses to begin with and not have to inject the heroine as a fix. That this Fed has been in almost regular bailout mode since 87 is saying something even if a meltdown has been averted so far. (87, 90s banking, Mexico, Asia, US capital markets) Each crisis has been met by the flood of paper and taxpayer bailout. No one has said that the pre Federal Reserve system with its partial hard money standard was correct or good. But the Fed was/is a bandaid on a poor system that remains poor. Wayne

To: BGR who wrote (72283)	12/24/1999 1:50:00 PM
From: Lymond	Read Replies (1) \| Respond to of 132070

BGR, I was thinking of populists in the late-19th/early 20th century American political sense, who were unabashedly in favor of easy money, rather than the more radical "heads will roll" variety. I agree that the function of banking is extremely important in a capitalist society. I also agree that the Fed system in place basically works and is not in need of drastic reform. But I do fear that the current Fed has been too easy in its policy, and that it risks big problems down the road if it doesn't more aggressively step on the brakes. Signs of asset inflation are rather worrisome, and ultimately very dangerous, as they inevitably lead to overinvestment. The end result, as history has shown time and time again, is never pretty. It's the cost of an overly loose policy. I do not question the Fed's role as the ultimate provider of liquidity in tough times. The problem is that they often tend to overdo it. "Averted a post 87 depression?" Please. If you recall, the Fed had to aggressively tighten in 88/89 to offset its over-easing in late 87. The same is occurring today. IMO, the Fed's main job is to protect the value of the currency. It's second primary responsibility is to regulate the banks. The path towards long-term prosperity is best achieved during periods of dollar stability when the Fed has little to do except lean against the wind when banks get overzealous, and ease a bit when things get tight. But when signs of speculative froth are so blindingly obvious, a more aggressively strict policy is IMO clearly called for. Is blind faith in TL objective? Well, you pose an obviously loaded question. <g> I've always prized reason over faith myself. But I do believe one thing: When poor investment decisions are made, the stakeholders must bear the primary cost, not the public. This was not the case with the S&Ls, for example, when most senior creditors and depositors got off scot-free. As for social security (since you asked), yep -- I think it should immediately be abolished, the funds remitted to the contributors, who manage them as they see fit. Obviously some provision would need to be made for the less well off, but in general the current SS system is an antiquated solution. Happy Holidays, John