5 ms·

> There is a big difference between using gold and silver for currency--which people did for thousands of years--and a gold- or silver-backed paper currency, wh

> There is a big difference between using gold and silver for currency--which people did for thousands of years--and a gold- or silver-backed paper currency, which only existed for a couple hundred years at most. I know gold standard fans like to equate them, but they are not the same thing at all. That's a very interesting point! I think I "knew" that they were different without ever putting it together like that. It's obviously true though, there were a number of years here in the US when you could own dollars but not the gold that the dollars supposedly represented. http://en.wikipedia.org/wiki/Executive_Order_6102 http://en.wikipedia.org/wiki/Executive_Order_6102 > Gold and silver used as money were actually a form of barter. I'm not sure I agree with that but it's probably semantics. Is gold "money" or "commodity" and why? There's no obviously right answer. If people did bookkeeping in ounces of gold and paid their taxes in ounces of gold, doesn't that make it "money" in the sense that we would use today? > Fiat currency is resistant to such manipulation because no one can ever control enough of it to manipulate the economy. The government can create or destroy as much as it needs to. So it's not clear to me that granting the government (technically the Federal Reserve which is privately owned and truly only answers to its owners) control over the economy the way we have is actually a good thing. You still have an entity that can manipulate prices and the economy, it's just most people accept this as a good thing without any thought at all. Most people probably still believe that the gold inside Fort Knox or the Federal Reserve banks are somehow meaningful and in some way related to our money; but they aren't. You've traded the possibility of someone manipulating the economy in a harmful way for the certainty that someone will manipulate the economy but with the outcome unknown at any time. The Fed still does price fixing, by the way. They fix the price of money, or as most people call it, the interest rate. Because their balance sheet knows no limits they can buy or sell as much of anything as they want until the interest rate is the "right" one as decided by a bunch of people who don't have a lot of connection to the real economy anymore. You might argue that the Supreme Court is similar (unelected and generally unaccountable) but there's a difference. The people on the Supreme Court can make decisions based on existing law and precedent and legal arguments brought before them. And it's fairly easy for the Congress to override their decisions if they're particularly egregious since they publish opinions that explain their reasoning. As it stands there's really no feedback mechanism for the Federal Reserve short of writing new laws that change the entire system. None is built in. Sure they have to go before Congress twice a year, but they can't be fired for policy opinions. It's a sweet gig if you can get it, but it's kind of insane just how much power these folks wield and how little accountability they face for their actions.

snowwrestler 12y ago
The Fed is part of the federal government. It was created by Congress, its leaders are appointed by the President and confirmed by the Senate, it creates and enforces federal regulations, heck it even has its own federal police force. It's an independent federal agency, like the EPA, FCC, FTC, SEC, etc. Its actions are constrained by the mission boundaries set by Congress. In the case of the Fed, part of its mission is to manage the economy for "maximum employment, stable prices, and moderate long-term interest rates." Another part is to set regulations on how banks can act, sort of like how the FCC sets rules on how communications companies can act, or SEC on financial companies. It does get adjusted by Congress. The Dodd-Frank bill passed after the financial meltdown changed the Fed's role and gave it some new regulatory powers. If you read the Fed's mission web page: http://www.federalreserve.gov/aboutthefed/mission.htm http://www.federalreserve.gov/aboutthefed/mission.htm The 3rd bullet is new, added by Dodd Frank in 2010.
- msandford 12y ago
  So I guess where we differ here is on practical matters, not theoretical ones. Sure Congress created the Fed, but it's unlike any other independent federal agency. The president can fire the head of the FCC, FTC, SEC, EPA, etc. The president can't fire the head of the Fed. I understand why that is (to remove political influence) but at the same time, it makes those folks completely unaccountable. The only way to change things is to pass new laws, and for some reason it's damn near impossible to pass new banking laws. Probably because the banks have so much money and can lobby so effectively as a result.
  - snowwrestler 12y ago
    The Fed chair is among the most independent officers of the U.S., but they are not completely unaccountable. As a civil officer of the U.S., the Fed chair could be impeached by Congress. But the standard for impeachment is high; I doubt a good-faith disagreement over monetary policy would do it. In general, it's hard to pass major laws. I'm not sure laws governing the Fed have any special difficulty. Gramm-Leach-Bliley in 1999 (which banks lobbied for) and Dodd-Frank in 2010 (which banks lobbied against) both had major impacts on the role of the Fed. There are plenty of issues with a 10+ year gap in major bills.

snowwrestler 12y ago

The Fed is part of the federal government. It was created by Congress, its leaders are appointed by the President and confirmed by the Senate, it creates and enforces federal regulations, heck it even has its own federal police force. It's an independent federal agency, like the EPA, FCC, FTC, SEC, etc. Its actions are constrained by the mission boundaries set by Congress. In the case of the Fed, part of its mission is to manage the economy for "maximum employment, stable prices, and moderate long-term interest rates." Another part is to set regulations on how banks can act, sort of like how the FCC sets rules on how communications companies can act, or SEC on financial companies. It does get adjusted by Congress. The Dodd-Frank bill passed after the financial meltdown changed the Fed's role and gave it some new regulatory powers. If you read the Fed's mission web page: http://www.federalreserve.gov/aboutthefed/mission.htm http://www.federalreserve.gov/aboutthefed/mission.htm The 3rd bullet is new, added by Dodd Frank in 2010.

msandford 12y ago
So I guess where we differ here is on practical matters, not theoretical ones. Sure Congress created the Fed, but it's unlike any other independent federal agency. The president can fire the head of the FCC, FTC, SEC, EPA, etc. The president can't fire the head of the Fed. I understand why that is (to remove political influence) but at the same time, it makes those folks completely unaccountable. The only way to change things is to pass new laws, and for some reason it's damn near impossible to pass new banking laws. Probably because the banks have so much money and can lobby so effectively as a result.
- snowwrestler 12y ago
  The Fed chair is among the most independent officers of the U.S., but they are not completely unaccountable. As a civil officer of the U.S., the Fed chair could be impeached by Congress. But the standard for impeachment is high; I doubt a good-faith disagreement over monetary policy would do it. In general, it's hard to pass major laws. I'm not sure laws governing the Fed have any special difficulty. Gramm-Leach-Bliley in 1999 (which banks lobbied for) and Dodd-Frank in 2010 (which banks lobbied against) both had major impacts on the role of the Fed. There are plenty of issues with a 10+ year gap in major bills.