To: Bilow who wrote (775987 ) 3/21/2014 2:24:13 PM From: RetiredNow Read Replies (1) | Respond to I agree with this pretty much completely. Where we differ is in how important that eventual high inflation is. I think it's a *very* cheap price to pay for the privilege of not having our country fall into anarchy and get taken over by the communists. - billow That's an awfully big leap you are making...that allowing markets to correct and sweep away the bad debt will lead to anarchy and communism. On the contrary, NOT letting the markets correct and keeping the bad debt on the books by propping up zombie banks and inflating the price of everything will lead to Mammoth Government and Orwelling Dictatorship. The more free our economy is the more free our society is. I do believe in good regulations to guard against monopolies, corruption, and cronyism, but beyond that, central planning, rate setting, and monetary dilution are one way streets to a dismantling of our economy and society in the larger sense. There is no free lunch. You're claiming that a "fair rate of interest" does exist. Fine. If you and your buddy agree about this fair rate of interest, you should be perfectly content to write up a contract that specifies it. You can then borrow money from or lend money to your buddy. Nothing the Fed is doing prevents you from running around telling everyone what your fair rate of interest is. - billow You miss the point. Yes, two sides, a buyer and a seller, make a market. However, to determine what the fair interest rate on the US debt is, you have to look at what hundreds or thousands of buyers and sellers would arrive at. That is a free market determination. What the Fed does when they institute QE or set the interest rate they are willing to lend at the Fed window, is setting prices. It's the same thing as when a large bank uses their large size to corner the market in aluminum to manipulate the price...and that costs the consumer a shit load of money, which the large bank pockets. The Fed is doing the same thing. They are using their size and power to defraud the US citizen of the fair market rate of interest on their savings accounts. In addition, they are enabling a runaway spending Congress to further load down the US citizen with so much debt that it will never be repayable. You talk about all the benefits, but you completely ignore the very real costs to the taxpayer.Humans create bubbles and panics without any need for intervention by central banks or anyone else. This is why panics and bubbles have been present in *every* capitalist society since capitalism was first invented. - billow I agree with that. Where you and I disagree is the impact that Central Planning has. The Fed essentially uses its macro tools to try to smooth out the business cycle: make the troughs shallower and the peaks not so bubblicious. As you know, during the 100 years of the Fed, they have failed miserably at smoothing out the business cycle. So why do they continue to try to do it? All they end of up doing is mistiming, which exacerbates the business cycle peaks and troughs. Are you familiar with the bullwhip effect? It's something taught in every Operations class in MBA school. Essentially, it shows how perturbations upstream, create wild gyrations downstream of the process. It's a kind of wave theory. This is what the Fed does. The routinely mistime things and create more issues. Their constant lowering of interest rates over the last 3 decades has created an economy that has been on an artificial high. This has made the peaks and valleys violent and more frequent. The Fed should just butt out. They add no value at all. That's what the data tells us.
