The following is a discussion resulting from reading the article. The article is in Rolling Stone magazine and I recommend reading it before reading through the following Face Book posts.
http://www.rollingstone.com/politics/story/32906678/looting_main_street/print
The discussion turned into an interchange of ideas about our banking system, the Federal Reserve and free markets, whether or not they work in our favor. I decided to transfer the discussion to this blog to be able to more easily go into the kind of depth necessary to properly address the questions associated with this topic.
Tiny
wow. "low finance" indeed. i feel this way about my student loans, in a way, when i took them out, the federal cap was set, then years later, changed by another president. my interest seems...biblical...in how i owe MORE every year no matter what i pay. gah.
April 3 at 9:45am
Larry Enge
The large banking establishments(ie. JP Morgan et al) are out of control. They got this way by virtue of the protection they’ve had and continue to have from the Federal Reserve System. They constantly employ credit swaps, currency swaps and many other risky though lucrative money manipulations. Within the banking system is bread an attitude of invincibility and arrogance since they know they can buy their way around any restrictions and have the backing of the Fed. It is absolutely positive that they could not get away with this debauchery without the backing of the Fed. They would have to face a real market which would end the risky behavior and arrogance.
The life of our nation has always been threatened by the banking establishment. A push for a federal reserve-type central bank began immediately after our country was established. Thomas Jefferson and James Madison strongly opposed this. In spite of their opposition we finally got a central bank for a few years until it’s charter ran out. Another effort was made for a private central bank. And after much opposition another charter was granted. By the time of Andrew Jackson it was clear how dangerous it was to have central bank. So when the charter was up, Jackson vetoed the charter renewal at great personal and political expense. In 1830 Jackson prevailed and we did not have another central bank until 1913, the birth of the Federal Reserve System which is actually part of an international banking cartel.
The international “banksters” pushing for us to have central bank again finally succeeded in 1913 with the passage of the Federal Reserve Act. This bill, previously orchestrated by Nelson Aldrich, was soundly defeated under President Taft. In order to defeat Taft, the banking community backed Woodrow Wilson, and, to ensure his victory, encouraged ex- President Teddy Roosevelt to run again in order to siphon votes from the popular Taft. Wilson won by 42%, then slipped the Act through a bare quorum of Congress on December 23, 1913 after most of the opposition had gone home for the holidays. ... See More
A couple of quotes from Jefferson:
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing
power should be taken from the banks and restored to the people, to whom it properly belongs.
—Thomas Jefferson, 1802
“The banks… have the regulation of the safety-valves of our fortunes, and…condense and explode them at their will.” –Thomas Jefferson to John Adams, 1819.
As a result of the Fed the environment of the banking establishment is toxic to regular folks. Notice how Wall street (where the banking establishment lives) got the big bail outs in spite of the fact that the rest of us Americans knew it was a bad idea to bail them out. The wall street bubble is being reinflated by massive infusions through the Federal Reserve System. Yet in the rest of the world, business failure rate continue unabated. Cities, counties and states are particularly hard hit since these local businesses are a main source of revenue for these local governmental institutions. Nearly all 50 states have fallen deeply into the red over the past 5 years. The Wall Street bailouts and infusions are costing us more than we realize. They are adding greatly to the weakening of our economy as well as subjecting us to the predatory arrogance of the banking establishment.
Please do not consider what’s happening in the banking industry as an example of free market gone berserk. The banking establishment has rarely been a free market and not at all been a free market since the Federal Reserve took over the nations banking system.
Sun (4/4/10) at 2:33am
Kat
Didn't Alan Greenspan admit not too long ago that he had based everything on crazy Ayn Rand. Now he says he was wrong... about everything.
Monday (4/5/10) at 4:26 pm
Hey Kat, thanks for responding.
Alan Greenspan was conflicted -- and rightfully so. During most of his tenure he favored free markets. And yes he was greatly influenced by the Objectivism of his long time associate Ayn Rand. His conflict, however, was inevitable. He favored free markets for good reason yet he was chairman of the very institution that by its existence suspended the dynamics of the free market. The Fed’s mission as lender of last resort - in essence a safety net for the banking industry -- cancels out the major function of a free market. That function being to punish risky behavior.
It puts the Fed in a catch 22. Risky behavior in the market can be very lucrative --and it is especially attractive when you know that if you fail you will be bailed. So the Fed in order to control the risky behavior (its presence encourages) presses for regulation in the financial markets (at least so they appear to do so). Greenspan at least tried to be true to his beliefs in a free market. But deregulating a market that is handicapped, that is minus its main control apparatus ( exposure to risk) is suicide as we have seen. The problem is the existence of the Fed.
The banking industry has always wanted a central bank with the power to expand the monetary supply endlessly. During the years that we did not have one, the banks pushed very hard for a central bank because they did not like the market limitations they were exposed to.
Tuesday (4/6/10) at 12:14 am
Kat
But do you think that everyday investors are protected in a free market? How do we protect what little we have from unscrupulous bankers? (But the FDIC is different from the Federal Reserve. Do you believe in one and not the other?)
I think we've discussed this before - but I think that free markets require a certain faith in humanity that I just don't have.
Tuesday (4/6/10) at 7:50 am
I will respond to Kat's questions in the next blog entry.
i absolutely loved the rolling stone article you posted! i think we need more of naming of names, what they did, and how they did it. it's an often neglected but important componant of checks and balances. one concern i have of letting the market primarily inflict the punishment deserved for fraud and abuse, and to thereby discourage it, is that all too often, those that are guilty, won't have a reason to care. a hit it and quit it mentality will always prevail among the unscrupulous. so what if they never work on wall street again? or anywhere for that matter. if they've got tens of millions of dollars salted away and have protected themselves from criminal prosecution, theyre set, -don't look back. but in their wake, personal savings of the innocents are wiped out, lives ruined. the lure of making more money in a few years underhandedly than one could in an entire career above board, will always be for some, irresistable. i'm doubtful that the tightening up of loose practices by a firm forced to absorb stagerring losses would adequately stand up to the influence of potentially hundreds of millions of quick dollars. wasn't there a fairly regular cycle of booms and busts prior to the great depression and the regulatory controls it inspired, followed by decades of relative stability until deregulation started chipping away in the 80's? would i be wrong to associate a cause and effect there? i appreciate youre creating this blog and enjoy reading youre thoughts and comments --denny exner
ReplyDeleteDenny,
ReplyDeleteThanks for commenting. I created a new post where I try to address some of your questions as well as some of Kat's questions. Go to "In Response to Questions 1"