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What if rich bankers had the power to give themselves free money, creating it out of thin air? What if this decision were made not by elected officials, but by unaccountable lords of crony capitalism?

This is reality in America today. The institution with this power is called the Federal Reserve. It only gives free money to rich banks, not small businesses or ordinary people who could use some financial help -- those people are left to suffer the consequences of rising prices and increasing economic inequality. And there is no way we can vote to replace the officials at the Fed who are responsible for this reverse Robin Hood economic policy -- they don't have to run for election!

The free money for the rich is called "quantitative easing" (QE). Here's how it works: The Federal Reserve buys federal treasury bonds from big banks, at an artificially high price. The banks pocket the profit and invest it in other assets such as stocks, driving up their price and making more money. The Fed could buy the treasury bonds directly from the U.S. Treasury Department, but that wouldn't give free money to the banks, which is the whole point of QE.

The Fed also buys toxic mortgage-backed securities from banks that want to get these bad investments off their books. The Fed doesn't help homeowners struggling with bad mortgages, however.

In other words, an unelected institution, the Federal Reserve, is giving corporate welfare to wealthy investment banks, and stiffing everyone else.

This is obscene. There are plenty of struggling businesses and people themselves who could use the money -- and make much better use of it in the economy, stimulating demand and creating jobs -- rather than giving it to banks that use it to make more money for themselves and their executives rather than loaning it out into the real economy.

Furthermore, the policy of quantitative easing artificially inflates the stock market and other markets around the world, creating financial instability and increasing the likelihood of a crash, another 2008-style financial crisis, and another round of bank bailouts (even more corporate welfare for irresponsibly over-leveraged investment banks).

In 2013, the S&P 500 index went up 30%. So far in 2014, it's already down 5%, and falling fast. Emerging markets are in even worse shape, and currencies such as the Turkish lira and Argentine peso are collapsing. Why? Because the Fed decided to "taper" the QE.

In other words, the financial markets became addicted to QE, like a drug, and when it's withdrawn -- when even a little bit of the QE is reduced -- markets and currencies around the world begin to crash.

The world economy has become trapped in a nightmare scenario, in which the only way to "prop up" the markets and prevent financial catastrophe is to keep creating more and more money and giving it to rich banks, so that they can inflate the next bubble (stocks, commodities, housing, student loans, whatever). The economy is now just a big, rigged game of "bubble musical chairs." Round and round the free money for the rich goes, first into one asset class, then another, as bubbles form and pop -- enriching the insiders with political connections every time, but destroying the wealth of ordinary people in the process. From the point of view of the bankers who run the Federal Reserve, perhaps this is a feature, not a bug.

One day -- and that day may be coming soon -- the music is going to stop. When the last bubble is blown, what may "pop" is the entire economic system as we know it. Something will have to be created to replace it. We'd better start thinking about what that should be.

The kind of collusion, corruption, and systematic threat to the financial well-being of the public that we see today with the United States Federal Reserve has no place in a democracy. We must find a way to stop the vicious cycle of free money for the rich and repeatedly inflating and popping asset bubbles, and transition to a more stable, sustainable economy for all.

Most importantly, we must make sure that the new economic system has an aspect of democratic accountability: The people who decide how much money to create and whom to give it or lend it to must be required to run for office and compete for the votes of the people. A "Federal Reserve" type of institution -- a central bank for a society -- must answer to the public at large. Otherwise, we are simply living in a dictatorship of the bankers. We the people must figure out how to change this and create a better, more democratic economic system for everyone.

Poll

Should central bankers be democratically elected?

65%40 votes
21%13 votes
13%8 votes

| 61 votes | Vote | Results

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Comment Preferences

  •  Tip Jar (23+ / 0-)

    The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

    by Eric Stetson on Mon Feb 03, 2014 at 04:42:01 PM PST

  •  Well Since the People No Longer Have or Earn (7+ / 0-)

    enough money to grow their purchasing, there's no way for banksters to grow their investments except with fantasy money games, betting on each other etc.

    I wonder if there is any way out of this for an economy that has taken so much opportunity from its masses.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Feb 03, 2014 at 04:52:57 PM PST

    •  nothing short (7+ / 0-)

      of a radical economic restructuring will get us out. keynesianism on steroids. a reversal of the class warfare of the past three decades. a reversal of the deliberate and calculated transfer of wealth from the poor and middle class and even moderately wealthy to the extremely wealthy that has defined the economics of the past few decades.

      The cold passion for truth hunts in no pack. -Robinson Jeffers

      by Laurence Lewis on Mon Feb 03, 2014 at 04:57:03 PM PST

      [ Parent ]

    •  I think the way out is democratic control of the (3+ / 0-)
      Recommended by:
      Shockwave, ozsea1, gerrilea

      money supply and where the new money that gets created goes. I've tried to think of other possible ways out, and haven't really been able to think of any besides this idea.

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 05:05:37 PM PST

      [ Parent ]

  •  krugman (7+ / 0-)

    likes it:

    Are central banks helping? "I wouldn't say that quantitative easing [QE] has been decisive. It is a fragile and fairly weak tool, so to ask it to override fiscal austerity is asking too much." But he wants more QE and is relaxed about inflation at 4% or 5%.
    and opposes easing:
    Memo to the Fed: Please don’t do it. True, the arguments for a taper are neither crazy nor stupid, which makes them unusual for current U.S. policy debate. But if you think about the balance of risks, this is a bad time to be doing anything that looks like a tightening of monetary policy.

    O.K., what are we talking about here? In normal times, the Fed tries to guide the economy by buying and selling short-term U.S. debt, which effectively lets it control short-term interest rates. Since 2008, however, short-term rates have been near zero, which means that they can’t go lower (since people would just hoard cash instead). Yet the economy has remained weak, so the Fed has tried to gain traction through unconventional measures — mainly by buying longer-term bonds, both U.S. government debt and bonds issued by federally sponsored home-lending agencies.

    Now the Fed is talking about slowing the pace of these purchases, bringing them to a complete halt by sometime next year. Why?

    The cold passion for truth hunts in no pack. -Robinson Jeffers

    by Laurence Lewis on Mon Feb 03, 2014 at 04:54:34 PM PST

    •  I don't have a problem with QE itself, but the way (7+ / 0-)

      it's being done. If it were done in a different way -- say, by having the Fed buy up the debts of struggling homeowners, people with student loans, etc., or only giving the QE funds to community banks that will loan out the money to real people and small businesses in America's cities and towns -- then, QE could be a very useful and equitable stimulative tool for the economy.

      Bankers at the central bank giving money to bankers at investment banks, to use to invest in financial assets, is not a progressive policy in my opinion. Monetary policy could stimulate the economy much better by helping people, not investment banks.

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 04:59:44 PM PST

      [ Parent ]

      •  so the fed (2+ / 0-)
        Recommended by:
        Neuroptimalian, HeyMikey

        is to buy drowning loans and eat the losses? or bad mortgage backed securities?

        keeping interest rates low helps homeowners.

        The cold passion for truth hunts in no pack. -Robinson Jeffers

        by Laurence Lewis on Mon Feb 03, 2014 at 05:08:55 PM PST

        [ Parent ]

        •  Somebody has to eat the losses. (3+ / 0-)
          Recommended by:
          gerrilea, WattleBreakfast, HeyMikey

          Should it be suffering people, or should it be the institutions of society that are supposed to be designed to create economic stability and prosperity?

          Besides, the Fed has already been buying bad mortgage-backed securities from the banks.

          The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

          by Eric Stetson on Mon Feb 03, 2014 at 05:16:35 PM PST

          [ Parent ]

          •  Note that Fed buying MBS's helps banks, not people (4+ / 0-)

            who are behind on their mortgages and facing foreclosure. The Fed program to buy mortgage-backed securities is aimed at helping the bottom line of the banks. My overall point is that Fed policy programs need to be aimed at helping people in the real economy, not focused on improving the bottom line of investment banks.

            The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

            by Eric Stetson on Mon Feb 03, 2014 at 05:18:25 PM PST

            [ Parent ]

          •  and where (4+ / 0-)

            is the fed supposed to get the human resources to analyze all those loans? and how much punishment is it supposed to take, and who is to fund its losses?

            i'm no fan of the fed- greider's book remains the definitive account- but i'm not sure you understand what it is or what it does.

            The cold passion for truth hunts in no pack. -Robinson Jeffers

            by Laurence Lewis on Mon Feb 03, 2014 at 05:34:13 PM PST

            [ Parent ]

            •  There's all kinds of things the Fed could do. (3+ / 0-)
              Recommended by:
              gerrilea, WattleBreakfast, HeyMikey

              Here's just one random idea that popped into my head: They could loan money to Rolling Jubilee, to help relieve debt among the American people (consumer debt, medical debt, student debt, etc.)

              They could loan money to community banks that pledge to use it to give loans to small businesses in their communities.

              The Fed wouldn't need lots of personnel to do such things. But they would need a mission change.

              The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

              by Eric Stetson on Mon Feb 03, 2014 at 05:45:43 PM PST

              [ Parent ]

              •  You could both be right. (1+ / 0-)
                Recommended by:
                annan

                But that might require action from Congress, and perhaps state legislatures.

                E.g.:

                (1) Congress could create a federal housing bailout agency with authority to issue bonds. The Fed could buy the bonds.  The agency could manage the loans and property transactions.

                (2) The Fed could buy state and municipal bonds. This would allow states & localities to run deficits during recessions. Most state constitutions require balanced budgets, so those would have to be changed at the state level.

                Didja see the latest from the NY Times (NOT The Onion)?

                Battles Loom in Many States Over What to Do With Budget Surpluses

                In a year when three dozen governors are up for election, unexpectedly robust revenues from taxes and other sources are filling most state coffers, creating surpluses not seen in years and prompting statehouse battles over what to do with the money.

                I trust we've all seen how, in the recession, states & thus localities have had to cut their spending and cut their workforces--like, by laying off teachers. This latest NY Times piece shows that was never a necessity; it was always a stupid idea; it created a lot of suffering for no reason. We could have run deficits for a few years, then paid off the resulting debt when the economy improved.

                The economy continues to grow. Many continue to be left behind. The suffering goes on.

                "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

                by HeyMikey on Tue Feb 04, 2014 at 09:20:32 AM PST

                [ Parent ]

            •  So, no accountability for expanding beyond (1+ / 0-)
              Recommended by:
              Eric Stetson

              their ability?

              and where is the fed supposed to get the human resources to analyze all those loans?
              They don't need to be analyzed, they need to be thrown out and the people in possession of said property, it's theirs!

              Jon Stewart asked the question: Why don't we just pay off these mortgages for the people?  

              Jon Stewart repeatedly said bailout money should not go directly to banks but to the people to pay off their bank debt. I recall Jon also saying the government could pay off all subprime mortgages for far less money than it was handing banks.

              -cut-

              By paying off the underlying mortgages, Stewart’s plan would have helped Main Street while eliminating the need to make hundreds of billions in credit default swap payments… the very same credit default swap payments that bankrupted AIG and others, necessitating massive taxpayer bailouts.

              We could have spent a little over $2 Trillion and the crisis would have ended...nope we were hoodwinked into supporting their scams to the tune of $31.3 TRILLION and counting.

              -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

              by gerrilea on Mon Feb 03, 2014 at 05:48:26 PM PST

              [ Parent ]

      •  I think what has to happen is that people (0+ / 0-)

        have to realize that currency is just a tool with no intrinsic value other than its integrity (our guarantee that it will be honored for all transactions) and that trying to use it to manage trade and exchange by adjusting the supply or withholding it entirely is a bad idea.
        I suspect the Fed came to the realization that the "cost" of currencyc-- i.e. jiggling the interest rate -- was not working in the sense of speeding up and slowing down trade and exchange. So, they stopped doing that. But, the people who were used to generating income from the spread and making bets didn't cotton to the new regime. Rather, they went out to find something else to jiggle and bet on (derivatives, CDOs, etc.) until the whole thing collapsed because everyone wanted to cash in on their bets at once.
        The crash of 2008 supposedly "lost" $40 trillion. Since all of our man-made and natural assets are obviously still here, that $40 trillion was an illusion. We can actually find real examples of how that went. Where I live, an acre of ocean front sold for $4.5 million in 2005. Now that same acre, as pristine as it was then, is appraised at $1.5 million. Did those three million just disappear? That depends on whether the buyer paid cash or borrowed from a bank. If the latter, the bank probably just wrote it off and it did, indeed, disappear. If not, then some local yokel is living high on the hog, but not letting on. :)
        Btw, the fellow who shelled out that $4.5 million used to be employed by Bear Sterns. Just tells us that the people managing our money aren't too smart.

        Money is for spending; souls are to be saved.

        http://hannah.smith-family.com

        by hannah on Tue Feb 04, 2014 at 04:03:57 AM PST

        [ Parent ]

        •  Money supply must be managed... (0+ / 0-)

          ...to avoid deflation due to growing population.

          I trust you understand why deflation is bad.

          Now imagine an economy with a fixed money supply and a growing population. Say, $1 billion fixed money supply and 1 million people, or $1,000 per capita. Now double the population over time, but keep the money supply fixed at $1 billion, and you have only $500 per capita. That requires deflation--falling prices and wages. The only way to avoid deflation with a growing population is to increase the money supply.

          "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

          by HeyMikey on Tue Feb 04, 2014 at 09:10:57 AM PST

          [ Parent ]

          •  There is no reason to have a fixed money (2+ / 0-)
            Recommended by:
            HeyMikey, annan

            supply, just as there is no reason to have a fixed number of yards or inches. Currency is a measuring tool to aid memory -- dollars are nothing but certified IOUs. We don't need to use them in familiar or intimate relations, but over long distances and time, they are really useful. Restricting access to them is unconscionable. Passing them through the hands of bankers so they can get a cut from lending them out is even worse.
            While it is true that modern banking was invented by the Dutch--private bankers -- the founders doubtless had an example of how that worked via the New Amsterdam bankers and consciously, in Article I, assigned the management of the currency to Congress, along with other weights and measures.
            The Fed is one of those compromises that has not worked well--sort of like the 3/5.
            To a certain extent, the SSI, Medicare, Unemployment Comp, EIC and the insurance subsidy program are efforts to circumvent the Congress and issue dollars directly to individuals and specific service providers. Congress has pretty much privatized itself out of influence, which is why many long time incumbents are bailing. If they can't have influence, they don't want the job.

            http://hannah.smith-family.com

            by hannah on Tue Feb 04, 2014 at 09:38:52 AM PST

            [ Parent ]

  •  federal reserve (1+ / 0-)
    Recommended by:
    gerrilea

    time to call an end to the wealthy's celebrated fed reserve. the scam just has to stop. imagine a life with no more artificial markets.  that is called stability and the wealth will stay where it belongs-in the hands of taxpayers, not the corrupt and the wealthy.

    •  Central banks are necessary, but the people must (2+ / 0-)
      Recommended by:
      ozsea1, WattleBreakfast

      have control over them. Currently, the bankers have control over the people. The problem is not the existence of central banking (IMO) but the way it's being done -- not democratically, and mostly for the benefit of the cronies of the central bankers. It could be done in a much better way for the benefit of the people and the economy in general.

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 05:10:45 PM PST

      [ Parent ]

  •  With at least 500 years worth of banking momentum (2+ / 0-)
    Recommended by:
    ozsea1, VClib

    behind the present unsatisfactory system, I fear that significant change including electoral accountability, is pretty unlikely.

    "The extinction of the human race will come from its inability to EMOTIONALLY comprehend the exponential function." -- Edward Teller

    by lgmcp on Mon Feb 03, 2014 at 04:58:23 PM PST

    •  Good things in society are often "pretty unlikely" (2+ / 0-)
      Recommended by:
      gerrilea, WattleBreakfast

      But we still should be advocating for what is good, what is better than the way things are.

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 05:01:58 PM PST

      [ Parent ]

    •  Then get drunk. (0+ / 0-)

      Because we're giving up on life on earth.

      Sound melodramatic? It isn't.

      There's more at stake here than our mcmansions and second cars.

      I tried to go online to find a similar bear head...but when I searched “Big Bear Head” it gave me a San Diego craigslist ad entitled “Big Bear needs some quick head now” and then I just decided to never go on the internet again.--Jenny Lawson

      by SouthernLiberalinMD on Tue Feb 04, 2014 at 08:15:56 AM PST

      [ Parent ]

  •  QE has made the rich even more rich, that's all. (7+ / 0-)

    And it's kept the banks from going under from their insane gambling that the rich Congress and Presidents allowed via repealing Acts and establishing Acts.  
    Private, undemocratic central banking has to be abolished for the good of humanity.  
    Public banking is the answer.  

    "Fragmented and confused, we have no plan to combat any of this, but are looking to be saved by the very architects of our ruination."

    by BigAlinWashSt on Mon Feb 03, 2014 at 05:06:05 PM PST

    •  This is exactly what we need to do...make all (3+ / 0-)

      banking NON-profit.

      Andrew Jackson had it right, IMO...

      "Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild
      Reality is, we've been screwed for a very long time.

      If Henry Ford Could Pay a $15 Minimum Wage 100 Years Ago, So Can We

      What's never discussed is the value of said dollar.

      In 1914, the average Ford employee made $14.56 an hour.  The purchasing power of said today is: $339.19!

      Meaning we all should be getting paid $339.19 per hour to have the same purchasing power 100 yrs ago.
          

      Cumulative rate of inflation:   2229.6%
      Ain't it great!

      GRRrrrrrrrrrrrrrrrrr..........

      -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

      by gerrilea on Mon Feb 03, 2014 at 05:24:17 PM PST

      [ Parent ]

      •  This is numero uno problem. (3+ / 0-)
        Recommended by:
        Eric Stetson, gerrilea, lotlizard

        The Fed, IMF, BIS, World Bank, ECB, Bank of England, Vatican Bank, all of em, ripping people off and putting people in poverty.
        The new Archbishop of something aligned with the new Pope recently said that the financial oligarchy control everything and decides who lives and who dies on this planet.  
        That's about it too. It has to end.

        "Fragmented and confused, we have no plan to combat any of this, but are looking to be saved by the very architects of our ruination."

        by BigAlinWashSt on Mon Feb 03, 2014 at 05:29:42 PM PST

        [ Parent ]

      •  No. Sorry. You're badly misreading ... (3+ / 0-)

        ...Moore's commentary.

        Henry Ford did NOT pay people $14.56 an hour. He paid them $5 a day.

        Adjusted for inflation, $5 a day in 1914 is worth $116.48 in buying power now. That is, $14.56 an hour today, NOT $339.19 an hour.

        Don't tell me what you believe, show me what you do and I will tell you what you believe.

        by Meteor Blades on Mon Feb 03, 2014 at 11:46:50 PM PST

        [ Parent ]

        •  Hummmm...opsy...I'm really not good at math (0+ / 0-)

          even with a calculator, dang it!
          :)

          Oh, and I misread the article too, dammit!

          :(

          Thanks for the clarification.

          -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

          by gerrilea on Tue Feb 04, 2014 at 03:14:00 AM PST

          [ Parent ]

  •  Yes, but I'd suggest we tax them all first! (3+ / 0-)
    Recommended by:
    BigAlinWashSt, Eric Stetson, ozsea1

    12 U.S. Code § 531 - Exemption from taxation

    Federal reserve banks, including the capital stock and surplus therein and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.
    It's the biggest scam rarely reported on.  There was a diary the other day on how the NFL is tax free...that's chump change compared to the banks tax-free status.

    So, the Federal Reserve prints this piece of paper, gives it to the banks at 0% interest and if you're lucky enough to get a loan, you pay your local bank interest.  That interest income they get from you is tax-free. They sell your mortgage backed loan, make billions...all tax free.

    Sweet deal they got going, makes me want to buy a bank.

    Ugh.......

    -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

    by gerrilea on Mon Feb 03, 2014 at 05:11:56 PM PST

  •  A central bank is a necessity, for it is through (3+ / 0-)
    Recommended by:
    Eric Stetson, gerrilea, ozsea1

    the central bank that a country formulates its monetary policy.

    The problem is that the Fed is a privately owned central bank and the monetary policy that it formulates can easily be dictated more by the interests of its private owners than those of the country as a whole.

    We're shocked by a naked nipple, but not by naked aggression.

    by Lepanto on Mon Feb 03, 2014 at 05:12:20 PM PST

  •  “Truck” Ben (3+ / 0-)
    Recommended by:
    Eric Stetson, Lepanto, ItsaMathJoke

    Before become the head of the Federal Reserve, Ben Bernanke acquired the nickname “helicopter” Ben, because he said we could always fight deflation by dropping money out of a helicopter.

    Now, using a helicopter would have been fine.  That way everyone would have gotten a little, and no one would have gotten too much.  Instead, he just used a truck, which carted the money over to the banks, and they got it all.

    •  Awesome comment! n/t (0+ / 0-)

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 05:23:42 PM PST

      [ Parent ]

    •  And imagine he was selected to run the banks. (0+ / 0-)

      In the first 150+ years of this nations history, we had a deflationary expansion, until the Federal Reserve was created.

      Deflation isn't a bad thing, we proved that once.  Inflationary expansion is unsustainable, it will collapse under it's own weight.  In an instant, millions will become paupers, just like the Crash of '29.  

      -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

      by gerrilea on Mon Feb 03, 2014 at 05:33:21 PM PST

      [ Parent ]

      •  Please give a cite for the deflationary... (0+ / 0-)

        ...expansion of the nation's first 150 years. Since the Civil War, there have been only six years when the economy expanded under deflation: 1879, 1895, 1922, 1928, 1939, and 1955. There was deflation without expansion in nine of the years between 1865 and 1900. The rest of the time there was an inflationary expansion.

        Deflation hurts debtors and boosts the fortunes of creditors.  See William Jennings Bryan.

        Don't tell me what you believe, show me what you do and I will tell you what you believe.

        by Meteor Blades on Tue Feb 04, 2014 at 12:05:23 AM PST

        [ Parent ]

  •  Voted 'no' in the poll for two reasons: (1+ / 0-)
    Recommended by:
    gerrilea

    1: I don't know enough to choose an appropriate person.
    2: all of our elections are rigged by moneyed interests. There's no way that elections of central bankers could turn out well for us (99%).

    But I agree that QE is being done all wrong -- creating money just to hand it over to the people who already have most of the money isn't helping anybody out here.

    Reality has a well-known liberal bias -- Stephen Colbert

    by ItsaMathJoke on Mon Feb 03, 2014 at 06:26:51 PM PST

    •  That's a fair criticism of the idea. How could (2+ / 0-)
      Recommended by:
      gerrilea, ItsaMathJoke

      those problems perhaps be avoided?

      Regarding your point,

      1: I don't know enough to choose an appropriate person.
      This would seem to be the biggest drawback of a democratically elected central bank. I wonder if some kind of two-stage election process might work. Or, candidates for the Fed could be mandated to have substantive debates about economic policy before the public (it could be a great economic education for the people -- imagine, for example, Krugman debating against Summers, or whoever, from different economic schools of thought, for seats on the Fed board).

      Regarding your other point,

      2: all of our elections are rigged by moneyed interests. There's no way that elections of central bankers could turn out well for us (99%).
      That's obviously a harder one to solve. Perhaps, like with all elections, there would need to be laws to prevent capture by big money, such as federal financing, or restrictions on campaign spending, etc. This is of course an issue for all elections.

      There's also the possibility of popular referenda for some economic policy decision-making, but I admit that this is an area where expert knowledge could be very helpful and therefore the results of direct democracy could be ill-informed and suboptimal.

      But, the totally undemocratic monetary policymaking system we have now is terrible, so I'm not sure the flaws of some kind of democratic replacement could possibly be any worse.

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 06:39:34 PM PST

      [ Parent ]

    •  I voted "yes" but I would prefer (2+ / 0-)
      Recommended by:
      Eric Stetson, ItsaMathJoke

      a jury duty style selection for the heads of the bank.

      A necessary part of this would be educating a lot more people about how banks work.

      I tried to go online to find a similar bear head...but when I searched “Big Bear Head” it gave me a San Diego craigslist ad entitled “Big Bear needs some quick head now” and then I just decided to never go on the internet again.--Jenny Lawson

      by SouthernLiberalinMD on Tue Feb 04, 2014 at 08:18:45 AM PST

      [ Parent ]

      •  Interesting idea. (3+ / 0-)

        I recently had a half-serious thought that I'd rather have a bunch of random people deciding who gets the free money created by monetary policy, rather than a bunch of bankers who want to scratch each other's backs.

        Using a lottocracy selection system would have its drawbacks, especially as you mentioned that people would need to be much more educated about banking. But, as we all know, there are also drawbacks of an electoral system, e.g. the role of money in campaigns.

        Maybe a system in which the random selection would come from a pool of people nominated by the public, with specific criteria for who would be eligible, to try to weed out people who would be totally unqualified or just in it for their own private interests. How exactly that weeding out process could occur, I'm not sure.

        The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

        by Eric Stetson on Tue Feb 04, 2014 at 11:44:54 AM PST

        [ Parent ]

  •  One job of the Fed is to regulate the money supply (1+ / 0-)
    Recommended by:
    Susan G in MN

    The Fed has two jobs...regulate inflation and unemployment.  One of their main tools is the regulation of the money supply.  The Fed reduces the supply of money, to restrict the economy, by selling Treasury securities from their inventory to the banks and holding on to the money the banks pay for the Treasuries.  The Fed increases the supply of money to lower interest rates and stimulate the economy by buying Treasuries from the banks...the money the banks receive go into their reserves and increase the money they can lend.

    This is done in huge amounts, hundreds of billions of dollars.  The big banks are the only place  that can handle the volumes of money.

    •  There's a lot more speculating than lending. (2+ / 0-)
      Recommended by:
      gerrilea, Lepanto

      You wrote:

      The Fed increases the supply of money to lower interest rates and stimulate the economy by buying Treasuries from the banks...the money the banks receive go into their reserves and increase the money they can lend.
      Theoretically, this is how it works. In reality, the banks that have the opportunity to sell Treasuries to the Fed don't tend to do a lot of lending. Mostly they use the money to speculate in various asset markets. It's not as though Goldman Sachs is using Fed money to give a loan to your local small business owner, which, if they did, could actually stimulate the economy.

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Mon Feb 03, 2014 at 07:07:40 PM PST

      [ Parent ]

    •  They've failed at their "mission" then. (0+ / 0-)

      http://www.federalreserve.gov/...

         >Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.
          >Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
          >Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
          >Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems.
      http://www.usinflationcalculator.com/

      If in     1913 I purchased an item for $ 20.00   
      then in 2013 that same item would cost:     $470.62

      Cumulative rate of inflation:   2253.1%

      http://www.shadowstats.com/...

      If unemployment were measured as it was during the Great Depression, which was caused by the Banks themselves, it would be higher today than it was then.

      Bernanke himself pushed for the deregulation in the late 90's that lead directly to the collapse of 2008!

      -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

      by gerrilea on Mon Feb 03, 2014 at 07:47:22 PM PST

      [ Parent ]

      •  Shadowstates is wrong. Again. ... (1+ / 0-)
        Recommended by:
        gerrilea

        Using U6 as the descriptor—unemployed, underemployed and discouraged workers—the Great Depression's U6 peaked at 37% in 1933. In the Great Recession, U6 peaked at 18% in March 2010.

        Don't tell me what you believe, show me what you do and I will tell you what you believe.

        by Meteor Blades on Tue Feb 04, 2014 at 12:18:51 AM PST

        [ Parent ]

        •  I guess it's whom one choses to believe... (0+ / 0-)

          what methodology is more reflective of the reality we all exist in.  I know that the price of everything has gone up and the portions sold have gone down.  Tunafish is up 60%.  Tide used to cost less than $6 for a gallon, now it's $12.00+ and you're getting even smaller sizes. Puffs tissues are half the size they were just 3 yrs ago.
          And when our government claims inflation/cpi is only 1.5% they're full of crap.

          Besides, to claim U6 was 37% belies the fact that they were including 13 -16 yr olds in those statistics. Today, we don't count underemployed, we don't count "discouraged workers" either, and the whole ball of wax is based on a survey, not actual numbers.  

          What is a bit more accurate?  I don't know.  Maybe if we compared population rates from both periods???

          http://www.huffingtonpost.com/...

          The U.S. population grew by just 0.72 percent in the year ended July 1, 2013, the Census Bureau reported Monday. That’s the slowest growth rate since 1937.

          The way the numbers are sliced and diced created out of loincloth and magically deleted...

          I'd trust the SSI Admin and/or the IRS numbers.  They have to know the truth.  They, after all, get regular payments for each individual taxpayer.  They'd know exactly how many people are and aren't working, right? And they could reasonably estimate the number of full-time, part-time and seasonal workers as well.

          -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

          by gerrilea on Tue Feb 04, 2014 at 02:44:08 AM PST

          [ Parent ]

          •  13-year-olds were NOT included in 1930s... (1+ / 0-)
            Recommended by:
            gerrilea

            ....statistics. U6 DOES count the underemployed. It does a worse job of counting the discouraged, only capturing a percentage of them. The comparisons of unemployment numbers from the 1930s and now includes a bit of educated guesswork, but the claim that unemployment is worse now than in the Great Depression is just dead wrong.

            I'm not arguing that things are hunky dory now. They certainly aren't.

            Don't tell me what you believe, show me what you do and I will tell you what you believe.

            by Meteor Blades on Tue Feb 04, 2014 at 08:39:21 AM PST

            [ Parent ]

            •  I agree, things are not "hunky dory" either. (0+ / 0-)

              Here's a link with a table for yrs 1929 to 1941

              http://www.u-s-history.com/...

              U6 today is the closet were going to get to real numbers for comparison today.

              1929 = 3.4%
              1930 = 8.67%
              1931 = 15.82%
              1932 = 23.53%
              1933 = 24.75%
              1934 = 21.60%
              1935 = 19.97%
              1936 = 16.80%
              1937 = 14.18%
              1938 = 18.91%
              1939 = 17.05%
              1940 = 14.45%
              1941 = 9.66%
              http://www.bls.gov/...

              7 States have a U6 in single digits, 43 have double digits, just in 2013 alone.

              Lowest is South Dakota with 7.1%
              Highest is Nevada with 18.1%
              If we take the U6 numbers from 2008 to present, we see the numbers compete with the Depression numbers but are going down:

              http://portalseven.com/...

              2008 = 13.6%
              2009 = 17.1%
              2010 = 16.6%
              2011 = 15.2%
              2012 = 14.4%
              2013 = 13.1%
              The "official numbers" for the depression are inflated, surprisingly so, they included people whom were working in "public works" positions in their unemployment numbers.  

              http://skeptics.stackexchange.com/...

              Why is it that we can't get accurate unemployment numbers from real sources, not computer generated "surveys"? Like the fictitious "birth/death" ratio, discouraged workers, etc.

              In any analysis, the bottom line is the Federal Reserve hasn't done it's job.  The outsourcing of living wage jobs to slave-labored nations have hidden the true economic hardships we all are facing.  We now can't afford to buy our own products we once produced.  

              In my own short lifetime, when I started working in 1980, I made $2.80 (for 2 months, then minimum wage went up to $3.35) an hour, today  I make less than that at my $9 hour job and I have a college education.

              http://www.usinflationcalculator.com/

              Cumulative rate of inflation:    182.7%

              Meaning: in 1980 the money I made while in High School, I could buy more products and services than I can today, as a grown adult with 30+ yrs of work experience!

              Why are we fighting over chump change again?  Recall the protests against McDonald's & Walmart's pay scales?  Those jobs should be filled by teenagers in High School, we're fighting over the scraps they've left us.

              -7.62; -5.95 The scientists of today think deeply instead of clearly. One must be sane to think clearly, but one can think deeply and be quite insane.~Tesla

              by gerrilea on Tue Feb 04, 2014 at 10:51:42 AM PST

              [ Parent ]

        •  U6 is the best measure we've got--now (0+ / 0-)

          I believe we retired the most accurate measure under Clinton, but I could be misremembering.

          Of course unemployment isn't as bad right now as it was during the Great Depression; what's worse isn't current economic conditions, but the outlook.

          They didn't have to worry about climate change in the 30s.
          Nor did they have to deal with the destruction of democracy as a fait accompli. There were obviously people trying to destroy democracy, and representative government generally, in the 30s, but it wasn't a done deal. It is now.

          In the 30s, they tried to destroy democracy with armies. Silly men. They could have just bought it.

          I tried to go online to find a similar bear head...but when I searched “Big Bear Head” it gave me a San Diego craigslist ad entitled “Big Bear needs some quick head now” and then I just decided to never go on the internet again.--Jenny Lawson

          by SouthernLiberalinMD on Tue Feb 04, 2014 at 08:23:37 AM PST

          [ Parent ]

  •  Congress created the Federal Reserve Bank (0+ / 0-)

    just over a century ago and delegated its responsibility to coin money and manage the currency. So, it's not appropriate to blame the Federal Reserve for distributing dollars as it has been directed to do. That it distributes them to bankers so they can lend them to everyone else is also part of the scheme. Congress keeps the financiers as its enforcers. Might as well blame the attack dogs rather than the neighbor who keeps them down the street.

    What more evidence do we need that Congress is to blame? Well, their doubling down on the deception by refusing to structure the revenue system so as to retrieve the dollars in a timely fashion should do it.

    First they issue dollars to cronies; then they don't arrange for them to come back. What more evidence do we need?

    If we want to be overly generous, we can argue that they've simply got things reversed -- don't know that spending comes first.

    http://hannah.smith-family.com

    by hannah on Tue Feb 04, 2014 at 03:39:03 AM PST

  •  Banks don't lend out reserves:..... (0+ / 0-)

    http://www.economonitor.com/...

    Now do they spend them.

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