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Originally Posted by Cadrid  I guess I have Down's syndrome, because I don't really see what's so "retarded" about taking an economical monopoly away from the obscenely wealthy and giving it back to the country as a single entity. Please elaborate. |
Sure. For one, there's no "country" as a single entity. Who should control monetary policy? The president, congress or the treasury department?
Now keep in mind that monetary policy is a long term effort, whereas politicians are elected every 4 years. How many would risk long term stability just to get some increased activity just before an election? This is the reason why the fed is not a government agency, they need to be free (or as free as possible) from such considerations and focus on the long-term wellbeing of the nation.
You could leave it all up to the market, which would certainly work. But that has its own implications: it'll lead to much more frequent ups and downs, hence mass layoffs and mass hirings will happen more frequently. This is a social question as well as an economic one. From an economic point, firing people then hiring others and having to train them again isn't optimal. From a social view, such uncertainty is a big burden on people who depend on an income; this will also affect their economic activity and likely lead to more saving. (less consumption also means fewer employees, so more people get fired) But back on the social cost: Considering most US states already have little employee protection, you could essentially be fired tomorrow, rehired somewhere else a month later, fired two months later and so on. This is not something many people could afford to have happen to them.
The increased volatility would also make the US far less attractive for foreign investors, who seek stability. Less foreign investment means less growth, less money coming into the US.
But is a central bank just the least bad option? Turns out, a central bank independent from government is actually a pretty good thing. It's so well established, Panama is the only country in the world that doesn't have one. (they use the dollar and hence don't have their own monetary policy)
Why is it good? Look at what a central bank does: they help with short term liquidity through repos (repurchasing agreements, see the FAQ above on that) and by doing so they increase confidence in banks, which is crucial to global capitalism. By setting the rate they loan money to banks, they decide between an expansionary or contractionary policy which influences growth, unemployment, inflation and so on. They also influence the value of the currency on the currency market, by buying or selling their currency; also important for stable growth.
People seem to object largely to fiscal policy and go from that to wanting to get rid of the fed, which does not control government spending. The central bank does monetary policy, the government does fiscal policy - a significant difference.
I've read an interesting article about bias towards bad science on youtube: a study was done with regards to vaccinations and the unscientific ones claiming they were harmful greatly outnumbered the scientifically sound ones. The difference in 'views' was even greater.
This seems to hold true for economics even more. I've scrolled through a couple dozen and didn't find a single non-sensational analysis of monetary policy... it seems to consist entirely of people who don't get "it". Example: Interest payments. Some videos claim the government pays interest to the people running the fed (some conspiracy of wealthy bankers) - this is, of course, bullshit. The government pays interest to the federal reserve, which transfers it to the treasury department, which is a government agency. The government pays interest to itself - also known as doing proper accounting. (if there was no interest attached, it'd create the false illusion of free money and that'd compromise data used for analysis.)
The government does pay interest on treasury bonds, but every investor can buy them and this isn't a way to funnel money to some influential families.
Anyway, this post is getting way too long
