27 November 2011

Denninger Still Misses The Point

Those who argue for "End The Fed" have yet to reconcile the fundamental nature of the problem: It is not The Fed that is the issue, it is the presence of so-called "laws" with no penalty for non-compliance that is where the problem resides.
In point of fact The Fed's actual mandate for stable prices is exactly correct.  Followed to the letter we have no debasement of the currency over time, no inflation, and you can save a mere 7% of your income -- if your Social Security taxes were then to be merely returned to you in retirement along with that 7% you would have an effective 20% saving rate for retirement and would need exactly nothing beyond that for a reasonable retirement lifestyle similar to that of your working years!  If you saved nothingyou would still have a 13% saving rate and we would meet the mandate of the "social safety net" allegedly to be provided.
If the "law" had actually been followed there would have been no ramp in credit compared to GDP because it could not have been funded.  There would have been no Internet bubble, no Housing bubble and no crash.  House prices never would have gone materially over 2x incomes and likely would be between 1x and 2x.  Medical and college costs would be what they were then.  Wages would have risen with productivity but not beyond, and you would have kept that standard of living increase instead of having it stolen by the vipers of Wall Street and the Capitol.  Jobs would not have been offshored and there would have been no incentive to hire illegal aliens and displace American workers.
So why didn't it happen this way?  That's easy: There is no "or else" in these so-called "laws."
Ending The Fed will do exactly nothing without fixing this problem.  Competing currencies will do nothing without fixing this problem.  In point of fact essentially every current economic issue we faceis found, at some point, in this singular premise.
Those who continue to beat on the "End The Fed", "Competing Currencies" and other similar-sounding drums are either missing the mark because they fail to analyze the problem or worse, they're shilling for those who are looking for yet another way to rob you blind when the current scam, which is about to collapse, comes down around their ears. [Emphasis in the original. –ed.]

Yes, technically, the problem is that the Fed is ignoring the plain black-letter law that is supposed to govern it, and no one is doing a single thing about it.  Yes, many of the problems will go away if the law is simply enforced.

However, those calling for the abolition of The Fed are still correct in doing so because they recognize, quite clearly, that The Fed cannot violate the law if The Fed does not exist.  Is reform possible?  Certainly.  Will it happen?  Maybe.

Even if reform happens perfectly, there is no guarantee that The Fed will still operate within the bounds of the law indefinitely.  There’s nothing preventing The Fed from regressing, save for one thing:  abolition.  Ending The Fed and preventing its resurrection will effectively prevent The Fed from making this sort of mess ever again.

Again, Karl Denninger is correct in noting that the laws, as they currently exist, must be enforced.  He’s also correct in noting that prior wrongs must be redressed by the government, through courts system.  There are laws on the books, they should be enforced, and the banksters should go to jail for the massive fraud they’ve committed.

However, Denninger is crazy to think that all that’s needed to keep The Fed from going bad is a little bit of law enforcement.  The history of central banks is quite clear:  they exist solely to enable the government to steal from the common people and line the pockets of their rich friends.  That’s what central banks do, and no amount of reform and law enforcement will change this fact.  And that’s why it’s time to end The Fed.

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