Almost Like A Sequel To “Trulbert”

Joe Doakes from Como Park emails:

The Federal Reserve was formed in 1913 for one purpose: to give the nation a stable money supply.  That’s it, nothing fancy, just provide a safe, secure, stable supply of money that will hold its value.  We needed that, because the previous national money schemes all went bust and decades of economic chaos followed.

 

After WW II, things looked pretty good and people had forgotten the old lessons.  In the 1970’s, Congress passed the Community Reinvestment Act to force banks to lend to unqualified borrowers and also expanded the Federal Reserve’s mission to include social engineering through monetary policy: “ . . . effectively promote the goals of maximum employment, stable prices, and moderate long-term interest rates . . . .”

 

Remember the recession under Nixon, WIN buttons and the malaise economy of the Carter years?  And the real estate crash we just had?  Social engineering gone awry.

 

The federal government still deficit spends but nobody will buy worthless US bonds so the Federal Reserve buys them with money that it prints up.  I suspect the reason that cash inflow isn’t showing as inflation is the rest of the economy is in deflation but the government changed the formula to hide the fact its borrowing only partly offsets the slow-motion crash.

 

Buyers have a fixed amount of money to spend on monthly house payments.  It doesn’t matter whether that $1,000 per month goes to interest or principal.  The Fed is keeping interest rates low to prop up home values to benefit Baby Boomers wanting to sell McMansions, but it’s killing retirees whose investment accounts earn nothing, cost management fees and are eroded by secret inflation.

 

I suspect the Fed will raise interest rates when more Baby Boomers have retired and need the investment money.  True, it’ll crush home values but retirees won’t care at that point.

 

They tinker with the money hoping to reward certain behavior but if it crashes the economy again – as the other systems did before it – then we’ll be standing around saying “What we need is a safe, secure, stable supply of money that will hold its value.”

 

Joe Doakes

“He who forgets his history…”

8 thoughts on “Almost Like A Sequel To “Trulbert”

  1. The Left will argue that money can be manipulated for the Greater Good of society. What they ALWAYS fail to consider is that labor cannot be manipulated. And, no one works for nothing. If the dollar becomes unstable, the cost of labor will NOT necessarily go down. Employers will respond by cutting their labor force.

    Which brings us back to the liberal solution: manipulate currency. Or – subsidize labor.

    Great – in a gulag. Not so good in a free market.

    Observation: Liberals know as much about money as they do about guns.

  2. JD, I read our post and was aghast at the omission of the absolute latest at the Fed. I cannot believe you missed it! Tsk, tsk… Fed will be pressure testing negative rates during next couple of years. Yes, it may actually cost YOU money for the privilege of having the bank use it. It is not longer about “what’s in your wallet?” but “how big is your mattress?”

  3. Sorry about a threadjack, but original post about girlie Dutch men trying to stop female harassment by the refugees is way too far down. Below is from Daily Caller no less – once again, Russians lead the way:

    A group of 51 refugees were brutally assaulted outside a night club in Murmansk, Russia, after they groped and molested women at a night club Saturday.

    The refugees had previously been ordered to leave Norway for “bad behavior” and tried their luck in Russia. What they didn’t realize when they went out clubbing in Murmansk is that Russians have less tolerance when it comes to sexual assault on local women than other European countries.

    The refugees allegedly groped and harassed women in a similar manner as the assaults in Cologne on New Year’s Eve. A group of male Russian took them aside to “educate” them that “Cologne is 2,500 kilometers south of here.”

    The refugees tried to flee but were quickly captured by the Russians. They then took them out to the street and gave them a beating they will remember. Police arrived to break up the fight but locals report that they threw a few punches at the refugees before arresting 33 of them. Eighteen refugees were in such bad condition they had to be take to the hospital.

  4. JPA – you’re right, if the bank is charging me money to hold my savings, I’m looking for a new mattress. And, as Boss suggests, diverting money to metal (.22 shells) and liquid investments (whiskey)!

    As for missing the news, let’s peek behind the curtain: I write about what interests me, when the mood strikes me. Some days I pelt Mitch with e-mails, other days are barren. Mitch chooses which posts to run and when to run them, which is as it should be: he’s the host, I’m the guest. Some columns are overtaken by events but the essential point remains relevant: manipulating the money cannot end well.

  5. Keynesian economics?
    No frikkin’ way. Keynes was a good economist whose work modified, but did not replace, market economics. At the foundation of Keynes work was his belief that economics is about the value choices of individuals, and individuals respond to economic incentives.
    The Dems, in particular, have repudiated market economics. There is nothing Keyensian about the way the US and world governments are trying to manage the economy.

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