Investing and Trading: Talk regarding abolishing the Fed

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You can barely browse through YouTube's finance videos without hearing talk about abolishing the Federal Reserve. Get rid of the Fed. The Fed is the anti-christ. The Fed is doing this, and the Fed is doing that. Ben Bernake this. Ben Bernake that.

Now mind you, I * hate * what the Fed is doing to the strength of the Dollar right now. I'm not 'pro-Fed', but I'm not 'anti-Fed'. Consider me neutral.

But for those that want to abolish the Fed? Let's not forget the problems the Fed has helped ease, or completely eliminate over the last 100 years.

Quick question.

You abolish the Fed.

What would you have to stop the fraudulent business practices that went on before the Fed / Central Bank, and when economies were based off of a hard currency? How would you stablize risk and price?

How would you stop panics? How would you stop instigated panics? How would you stop bank runs (both instigated and psychological) How would you stop gold hoarding with bank runs (just one tactic)? Although I believe the primary mission of the Fed has been lost, and they elongate the problems? Let's not just forget about the problems that were around over 100 years ago because we weren't there. The volatility that could be brought about at a whim, and instigated as moves to both hoard gold, and ruin a competitors business, whether your competitor was a bank or not. You could always ruin your competitors bank.

It goes back to what I said before. It's not the Fed, or free market, or the currency that is the problem. Human beings are the problem.

NOTE: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research and risk tolerance.

Category:

Education

Tags:

• howto
• trade
• InterestRates
• abolishtheFed
• stockpicks
• BenBernake
• Chairman
• FederalReserve
• investing
• finance
• business

[edsanville]

Interesting points made, but isn't the idea of a central bank equivalent to the idea of "arbitrarily setting the price" of money, which you previously equated with Communism in your oil speculation rant? What do you think about Milton Friedman's idea, (I think it was him), of adjusting interest rates mechanically, i.e. by a computer algorithm? At least that would remove some of the apparent irrationality and short-term populist politics of the system.

[AirelonTrading]

It sounds like a good idea, and one I actually supported - until you see it put into practice. It's been tried. Black box AI systems failed miserably. The computer can just never account for the irrationality of human beings.

I don't have a problem with setting a price on money; and that's not communism. Communism arbitrarily sets a price on goods and services. But at the same time I am *not* a strict capitalist.

[AirelonTrading]

I think the single greatest economical system ever to grace the planet was the designed economy from the book of Leviticus. That was a work of sheer genius. Unfortunately, it was designed for an agricultural society - which we are not. Land ownership for all. Set prices on food and land, that could still float. No usury. Controls on the money that flowed in the system. Past those simple rules? You could charge whatever you wished for other goods and services and the market determined price.

[Renegen1]

I don't agree with some of your points except that the abolish the fed talk is insane. The sad fact is that if Bear Sterns went bankrupt it would trigger a great depression. We've created the problem of moral hazard, but most agree that avoiding a great depression is better than having one and as a result having conservative banking for 1 generation.

[AirelonTrading]

That's a good point, and one I hadn't considered. Is having a conservative banking system worth the pain, suffering and death that a Great Depression would bring?

[snouchie]

Hey great videos I really appreciate what your doing!

I have the intelligent investor, security analysis, common stocks and uncommon profits, and the little book that beats the market.

What books are good?

Thanks!

[AirelonTrading]

Thanks a lot mate, I appreciate the comments.

Honestly? Bar none - "Trading for a Living" - By Dr. Alexander Elder.

[edsanville]

... explode of their own accord when the world's creditors, (most of whom are in Asia), begin to realize that the debtors are essentially deadbeats peddling a Ponzi scheme. Yes, I've been reading and watching a lot of Peter Schiff, Friedrich Hayek, and Ludwig von Mises (who predicted the Depression by the way). Hmmm... interesting stuff, though.

[edsanville]

(to the extent that anything works with irrational people involved). I am also convinced that the Fed *helped* cause the Great Depression through aggressive money supply expansion in the 20s, and *helped* to prolong it through aggressive money supply contraction in the 30s. Bernanke is right, we (central banks) won't make the same mistake this time, we will make different ones. This time, they will not contract the money supply, and long term interest rates will...

[edsanville]

Yes, after researching the issue more, I am not in favor of AI determining interest rates or money supply, unlike Friedman. However, I do believe that we would be better off without a Federal Reserve, and without central banks. My further reading has just pushed me further in that direction. Classically, interest rates were determined in the marketplace through the supply and demand of savings and investment. It's simple, and it works...

[NOMO567]

I don't like what I've learned about the fed but,I understand what your talking about is the psychology of people. We basically can not survive without a few elite groups of people at the top of the food chain telling people below how to feel. I wonder to how many ideas are really new or are these just a combo of old formulas that put different slants on old ideas.