Federal Reserve,Under Bernanke, Plays Politics

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Originally Posted by Elspeth

Really? I thought central banks-like the Bank of England-were created to aid capitalism. Central banks are private entities, not state-owned. Wouldn't a Marxist banking system have a state owned bank?

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I know of no arguing for Central banks in any classical Capitalist theory by Adam Smith or Bastiat, or any pure capitalist economist

http://laissez-fairerepublic.com/TenPlanks.html

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Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

The Federal Reserve System, created by the Federal Reserve Act of Congress in 1913, is indeed such a "national bank" and it politically manipulates interest rates and holds a monopoly on legal counterfeiting in the United States. This is exactly what Marx had in mind and completely fulfills this plank, another major socialist objective. Yet, most Americans naively believe the U.S. of A. is far from a Marxist or socialist nation.

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If the Fed is really a "private" bank in a capitalist system then it wouldn't have a "monopoly" and instead would be one of other competing factors for currency.

What Tecate said..

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Originally Posted by marv

Not surprising.

I worked as a computer systems engineer in the Kansas City branch J in the 1970s.

The original purpose of the Federal Reserve was to regulate affairs between the various national, state, and "street" banks. That meant to arrange overnight loans BETWEEN these banks to insure coverage of demand (checking) accounts. The FRB was also establish the rules for operating these member banks. Nothing more.

The FRB does not print/coin money, but only recommends to the Department of the Treasury how much is needed in circulation at any particular time. It's the DoT that actually orders the US Mint print/coin the money.

A political roll for the FRB? My, how times have changed. My response to Ron Paul's call to abolish the FRB is a resounding NO! Interbank management is needed in this complex economy. But reform, YES....back to the FRB's original purpose.

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Agreed. The FRS had done a credible job until 2007 or so when the government started letting marginal borrowers get into mortgages they couldn't handle, and then the cat got out of the box.

I think the intent of the system is sound, but it leaves me to wonder about the people that run it. It is as if the FED thinks it is above the law.