Dodd announces support for independent financial consumer protection agency

Next Wednesday, the Obama administration is expected to announce comprehensive reforms on the way the financial system is regulated. One of the proposals thought to be contained in the plan is for an independent financial consumer protection agency.
Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, Chris Dodd had been reserving judgment, but yesterday announced his support for such an agency, which would be responsible for “seeking out and putting an end to abusive financial practices.”

Under Dodd’s proposal, the independent consumer protection agency would:

* Have broad regulatory and enforcement authority over credit and bank products;
* Be responsible for protecting consumers from predatory practices of payday lenders, mortgage brokers, banks, and other financial institutions;
*have a seat next to the safety and soundness regulators as part of a systemic risk council.

Needless to say, the push back has already started from banking groups, and hints of inter agency turf wars, with SEC Chairman Mary Schapiro sending warning signals back in May that consumer protection shouldn’t be moved out of her agency’s broader role of regulating stocks and mutual funds.

“I question profoundly any model that would try to move investor-protection functions out of the Securities and Exchange Commission…It’s not a discrete thing that gets moved away without really damaging the fabric of the entire investor-protection regime.”

Advertisements

76 responses to “Dodd announces support for independent financial consumer protection agency

  1. Sara, with all due respect… please take the time to at least begin to understand the Federal Reserve. A year ago, I didn’t have a clue. But at this point, it’s quite apparent to me that they are the heart of all these problems… and Dodd continues to protect them.

    Dodd continues attacking the symptoms, while ignoring the disease.

    Please ask Senator Dodd why he lied to Jane Hamsher. Or has Dodd actually asked Bernanke for the names of the banks that received the $10 trillion from the Fed? Ha.

    Dodd is an insider and all your doing is helping to perpetuate a system that is out of control and not representative of the people.

  2. I like this quote in particular:

    Be responsible for protecting consumers from predatory practices of payday lenders, mortgage brokers, banks, and other financial institutions

    What about the predatory practices of the Fed? Oh wait… Dodd believes “monetary policy should be independent.”

    What a ridiculous comment.

    Should war policy be “independent?”

    Should fiscal policy be “independent?”

    Why should monetary policy be “independent?”

    I’ll tell you why:

    Because Senator Dodd doesn’t have a clue about monetary policy and he’s “banking” on America (and CT) not noticing that he hasn’t a clue about monetary policy.

  3. As for a “systemic risk council,” that’s a catastrophe in the making. It’ll mask the problems for a few years… as the bubble grows. Then it’ll burst and we’ll be even worse off.

    But it’ll probably happen. After all, if President “Judgment” thinks it’s good… then it must be good!

    Gotta love that judgment that led to the appointment of Taxman Tim as Treasury Secretary! And do you remember back in February when Timmy announced his “save the world” plan? The markets tanked because his plan lacked detail.

    Fast forward six weeks and Timmy gets PIMCO to say they’ll buy into his plan to have taxpayers pay for 94% of Wall Street’s toxic assets.

    And fast forward to last week when you see HuffPo reporting that Geithner’s plan got quietly shelved because no one (besides PIMCO) would buy assets for 6 cents on the dollar.

    The whole thing is a sham. And the Federal Reserve is at the heart of it.

  4. Why does Dodd oppose auditing the Federal Reserve?

  5. Sara, I don’t expect you to trash Dodd… but it seems reasonable for partisans to remain silent when it’s obvious their guy needs to go.

    Besides, as Scoop always says… Dodd needs to be grilled now… or you may be giving away a pretty safe seat.

  6. Is there anyone here who thinks that Dodd may be overcompensating to convince people that he is not really in the grip of the financial institutions that for years have sustained his campaigns? What we need is an agency of government to oversee the US Congress, now entirely in Democrat hands, and the executive department so that it does not establish a command economy, rather than a free economy. That is the direction that we are moving in. Anyone who thinks this is fine should revisit the collapse of the housing market, which is s prime example of government distorting a free market by placing unreasonable demands on it. Barney Frank and Dodd wanted everyone to own a house, even those who could not afford it, and forced the banks to lower their lending standards to accomplish this purpose. This is not ancient history. Now the same folk are beginning to tinker with the insurance industry. The results may be similar. But apparently no price is too large to salvage Dodd’s tattered reputation.

  7. Thomas Hooker

    Please ask Senator Dodd why he lied to Jane Hamsher. Or has Dodd actually asked Bernanke for the names of the banks that received the $10 trillion from the Fed? Ha.

    Could you please be specific about the lie you allege that Senator Dodd told Jane Hamsher?

  8. Thomas Hooker

    Is there anyone here who thinks that Dodd may be overcompensating to convince people that he is not really in the grip of the financial institutions that for years have sustained his campaigns? What we need is an agency of government to oversee the US Congress, now entirely in Democrat hands, and the executive department so that it does not establish a command economy, rather than a free economy. That is the direction that we are moving in. Anyone who thinks this is fine should revisit the collapse of the housing market, which is s prime example of government distorting a free market by placing unreasonable demands on it. Barney Frank and Dodd wanted everyone to own a house, even those who could not afford it, and forced the banks to lower their lending standards to accomplish this purpose. This is not ancient history. Now the same folk are beginning to tinker with the insurance industry. The results may be similar. But apparently no price is too large to salvage Dodd’s tattered reputation.

    Mr. Pesci alleges that Barney Frank and Chris Dodd are to blame for the housing bubble. Let’s keep in mind, however, that Mssrs. Frank and Dodd spent a dozen years in the minority and out of power until January 2007. And for the two years until January 2009 the Republican minority used a record number of filibusters to stop virtually all important Democratic legislation. That which made it through the filibusters was vetoed by Republican president George Bush. So accusing the Democrats of cooking up this financial and housing crisis when they didn’t have the legislative power to do anything about it is simply inaccurate.

  9. Thomas Hooker

    Why should monetary policy be “independent?”

    History has shown clearly that economies which feature central banks that enjoy a high degree of monetary autonomy suffer far less inflation, achieve higher economic growth rates, and their financial systems record far less fraud and abuse. Economies in which the central bank is under the thumb of the politicians find themselves riddled with corruption.

  10. Ben Bernanke and the Fedsters printed about $10 trillion in the past year. Jane Hamsher (and many others) have been calling for a release of the names of the banks that got that $10 trillion.

    Dodd made that promise to Jane on May 6. I have heard no followup, so I assume Dodd has not asked… therefore he lied.

    OR he may have asked (and therefore not lied), which begs the question… why doesn’t Dodd use his power of subpoena as Banking Chairman?

    Last week, Dem Oversight Chairman Towns asked for documents from the Fed (related to the apparent lie told by Bernanke to Congress about his involvement in the BOA acquisition of Merrill). Towns did not get the documents. So he used his power of subpoena and directed the Fed to release the documents.

    Until I hear credible reports that Dodd has asked for the documents… I am going to assume he lied.

    (Actually, Jane only got a promise for the $2.2 trillion in newly printed money… the other $8 trillion is in “guarantees.” Though… if a company goes belly up and those guarantees must be fulfilled… I find it hard to distinguish between the $2 T and $10 T.)

  11. My example of how Dodd could fulfill his promise:

    Dear Ben,

    In March of this year, Bloomberg News has reported that the Fed printed $2.2 trillion in the past twelve months. Who got that money?

    thanks,
    Chris

  12. Oh… almost forgot…

    On April 2, 2009, there were two “sense of the Senate votes.”

    One passed 95-3, one passed 58-39.

    The first asked the Fed to reveal the “nature” of the trillions of dollars they recently printed and dished out to their banker buddies. By nature, I mean it gave broad categories, such as housing or stocks (I think).

    The second asked the Fed to do the same as the first, BUT… it also directed the Fed to reveal the names of the banks that got the trillions of dollars.

  13. Chris Dodd voted for the first and against the second. Thus, Dodd voted against transparency and against good government.

    Though in fairness to Dodd, he apparently saw the light by May 6 when Jane Hamsher put him on the spot.

    Oh, but wait! Dodd hasn’t asked for the names. Shocking!

  14. History has shown clearly that economies which feature central banks that enjoy a high degree of monetary autonomy suffer far less inflation, achieve higher economic growth rates, and their financial systems record far less fraud and abuse. Economies in which the central bank is under the thumb of the politicians find themselves riddled with corruption.

    Inflation is a result of inflating the money supply.

    And Dodd likes to think of himself as a champion of the Constition. I suggest he enforce this clause:

    The Congress shall have Power… To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures (US Constitution, Article I, Section 8)

  15. Thomas Hooker

    Ben Bernanke and the Fedsters printed about $10 trillion in the past year. Jane Hamsher (and many others) have been calling for a release of the names of the banks that got that $10 trillion.

    Dodd made that promise to Jane on May 6. I have heard no followup, so I assume Dodd has not asked… therefore he lied.

    OR he may have asked (and therefore not lied), which begs the question… why doesn’t Dodd use his power of subpoena as Banking Chairman?

    So you allege that Dodd lied when he promised her he would ask the Fed for the names of the banks which received the $10 tn in additional liquidity created by the Fed, but that he had no intention of doing so? Is that correct? Is it fair of you to allege that he lied when you are not sure whether or not he asked the Fed for the information, and you are not sure whether or not he has actually received that information from the Fed? Wouldn’t it be more fair and prudent to contact Senator Dodd and Jane Hamsher to follow up and determine the facts before you accuse him of lying?

  16. Are you arguing that we should ignore the Constitution as a compromise to fight fraud, abuse and corruption?

    I disagree. I like the constitution. I say we fight that stuff in other ways.

    Besides… when was the last $10 trillion abuse and fraud perpetrated on any country? And it may very well be that the only reason we don’t yet see the real corruption is because Dodd opposes revealing the names of his campaign contributors… er… uhh… revealing the names of the banks that got the $10 trillion.

  17. Since he voted against the very measure on April 2, I don’t see much need for further due diligence on my part.

    But I’ll eat my words, if you can prove me wrong!

  18. Thomas Hooker

    On April 2, 2009, there were two “sense of the Senate votes.”

    One passed 95-3, one passed 58-39.

    The first asked the Fed to reveal the “nature” of the trillions of dollars they recently printed and dished out to their banker buddies. By nature, I mean it gave broad categories, such as housing or stocks (I think).

    The second asked the Fed to do the same as the first, BUT… it also directed the Fed to reveal the names of the banks that got the trillions of dollars.

    Did Senator Dodd vote for these resolutions? If so, isn’t that evidence of efforts to obtain precisely that information he supposedly promised Jane Hamsher that he would attempt to get? And if so, isn’t that proof that he didn’t “lie” to Ms. Hamsher, but indeed is actively attempting to do what he promised?

  19. Bernie Sanders and Russ Feingold voted for both measures on April 2. I trust Bernie and Russ… I don’t trust Dodd.

  20. Sorry, sorry… I’m fired up over this one and typing too fast.

    Dodd voted for the first, but not the second.

  21. sry… AP link appears broken, but maybe you can google cache the quote or something.

  22. Thomas Hooker

    Inflation is a result of inflating the money supply.

    And Dodd likes to think of himself as a champion of the Constition. I suggest he enforce this clause:

    The Congress shall have Power… To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures (US Constitution, Article I, Section

    Inflation is a result of creating money growth that exceeds the rate of real growth in the economy and a reasonable rate of inflation. Most economics believe that a moderate increase in prices is healthy, and that a drop in the general price level is injurious to an economy.

    The Federal Reserve System was created under FDR, if I’ve got my facts straight. So it’s been around for decades, and has served this economy and the federal government well. The six-year terms for Federal Reserve chairmen have also helped to defend them from frequent meddling by political leaders, but don’t entirely cut them off from accountability, as, for example, supreme court justices.

    The Federal Reserve System has never been found to be in violation of the constitution, so I’m a bit mystified as to why you would make the argument that Senator Dodd is violating the constitution by not calling for its dismantling.

  23. Thomas Hooker

    Besides… when was the last $10 trillion abuse and fraud perpetrated on any country? And it may very well be that the only reason we don’t yet see the real corruption is because Dodd opposes revealing the names of his campaign contributors… er… uhh… revealing the names of the banks that got the $10 trillion.

    Are you saying that the creation of monetary liquidity in our economy by the Fed is an example of corruption by the Fed and Congressional Democrats? The $10 tn figure you sight seems to be the figure for total monetary growth, not cash injected in terms of capital into specific banks. That’s a big difference. Even a bank with a trillion dollars in assets would only require about $35 bn in actual shareholders’ equity, given that it would translate into about a 5.5% tier 1 BIS ratio, which is certainly ample for any money center bank. Are you confusing total monetary growth, or a category of money supply with injections of capital into specific banks?

  24. Thomas Hooker

    http://timwhitelistens.blogspot.com/2009/04/amendment-related-to-s604-fed.html

    I’ve got some links in a post I did on April 30:

    I admit that I’m not familiar with the bill. But I checked the roll call vote for that particular bill and it is a hodge-podge, with many conservative Republicans voting for it, while other conservatives voted nay; and Democrats were also split as well. Seems a tricky bill on which to hang a senator.

  25. Mr. Pesci alleges that Barney Frank and Chris Dodd are to blame for the housing bubble. Let’s keep in mind, however, that Mssrs. Frank and Dodd spent a dozen years in the minority and out of power until January 2007. And for the two years until January 2009 the Republican minority used a record number of filibusters to stop virtually all important Democratic legislation. That which made it through the filibusters was vetoed by Republican president George Bush. So accusing the Democrats of cooking up this financial and housing crisis when they didn’t have the legislative power to do anything about it is simply inaccurate.

    It wasn’t that long ago Hooker, and you’re to young to have Alzheimer’s. But Just to get you started…

    http://donpesci.blogspot.com/2008/10/frank-moses-fannie-and-connecticuts.html

    http://donpesci.blogspot.com/2008/07/on-fannie-freddie-saints-and-sinners.html

    http://donpesci.blogspot.com/2008/10/freddie-fannie-dodd-and-mccain.html

    http://donpesci.blogspot.com/2008/10/founders-fannie-freddie-and-congress.html

  26. Thomas Hooker

    Sorry, sorry… I’m fired up over this one and typing too fast.

    Dodd voted for the first, but not the second.

    So Senator Dodd did vote for one bill that would have broadly revealed where the loans were going, but not specific names of institutions. Is that sufficient to continue to accuse him of lying? Or is it evidence of at least the beginnings of a good-faith effort to follow through on his promise to Ms. Hamsher?

  27. Thomas Hooker

    http://donpesci.blogspot.com/2008/10/frank-moses-fannie-and-connecticuts.html

    http://donpesci.blogspot.com/2008/07/on-fannie-freddie-saints-and-sinners.html

    http://donpesci.blogspot.com/2008/10/freddie-fannie-dodd-and-mccain.html

    http://donpesci.blogspot.com/2008/10/founders-fannie-freddie-and-congress.html

    Thank you for your posts, Mr. Pesci. I don’t believe I have Alzheimer’s yet, though my mother suffered horribly from it and died of complications of the disease about four years ago. I wouldn’t wish that disease on anyone.

    Please correct me if I am mistaken, Mr. Pesci, but you have not refuted my principal claim, which is that it was not Mr. Dodd who was in charge of financial policy, but the Republican congress between January 1995 and January 2007. And the Republican minority in the Senate did most assuredly stymie most of the Democrats’ legislative initiatives with a record number of filibusters between January 2007 and January 2008. And President Bush, a Republican was, indeed, in charge of the executive branch for the eight years leading up to the financial meltdown in late 2008. Now how in the world can you accuse Congressman Frank and Senator Dodd of engineering this financial collapse when they were in the minority and out of power for most of the period leading up to the meltdown? And how in the world can you completely ignore the fact that the country was being ruled by President Bush for the past eight years and congress by the Republicans for a dozen years? If I am indeed suffering from Alzheimer’s and my facts are wrong, then please inform me or my loved ones, and I’ll seek treatment. But if my facts are correct, don’t you think that you need to revisit your revisionist history that has erased all responsibility from the Republicans?

    It wasn’t that long ago Hooker, and you’re to young to have Alzheimer’s. But Just to get you started…

  28. Thomas Hooker

    Sorry, I meant between January 2007 and January 2009 in the previous post.

  29. AndersonScooper

    Hooker, clearly the Bush administration is to blame for the Housing Bubble that simply postponed the economic pain which was due to America after the tech bubble burst.

    And the fraudulent Republican notion that Frank and Dodd wanted every poor person to own a house, and that’s the source of our current problems, — is a fabricated lie.

    However, the failure to regulate derivatives, and the derivatives’ market is at the root of our current economic woes. This is something for which both parties share the blame. In the past ten years, huge bets were made, with the profits going to bankers’ greed, and the risk being borne by ordinary Americans, as ultimately proven out by the giant bail-out.

    Did Dodd know about the derivative game? What did he do to stop it? Or was he co-opted by the banking industry and the Bush administration?

    Or was he simply asleep at the wheel?
    So I don’t have a problem with asking the questions, or holding Dodd accountable. Yet I think the right-wing noise machine’s “Frank, Dodd, and poor people getting houses they couldn’t afford” mantra is one of their more dishonest efforts.

  30. Hooker, clearly the Bush administration is to blame for the Housing Bubble that simply postponed the economic pain which was due to America after the tech bubble burst.

    That’s ridiculous. Had we listened to Rep. Richard Baker (R-La.) and Rep. Ed Royce (R-Ca.), who begged for more regulation in the loan-granting free-for-all, the current crisis in the credit and financial markets could have been averted:

    Instead, Rep. Maxine Waters (D-Ca.), Rep. Gregory Meeks (D-N.Y.), Rep. Lacy Clay (D-Mo.) and others kept firing out race cards like dealers at Foxwoods. “We do not have a crisis at Freddie Mac, and, in particular, at Fannie Mae.”

  31. Hooker, clearly the Bush administration is to blame for the Housing Bubble that simply postponed the economic pain which was due to America after the tech bubble burst.

    Do you have any facts in support of this? I’m surprised you’re not blaming bush for the “tech bubble burst” too.

  32. Are you saying that the creation of monetary liquidity in our economy by the Fed is an example of corruption by the Fed and Congressional Democrats?

    No. I’m saying the Luxury Class / Political Class are corrupt.

    Even a bank with a trillion dollars in assets would only require about $35 bn in actual shareholders’ equity, given that it would translate into about a 5.5% tier 1 BIS ratio, which is certainly ample for any money center bank.

    So you’re saying that fraction is “good enough.” Interesting. Cuz last fall, Obama’s failed economic team of Bernanke and Geithner seemed to say there wasn’t enough capital out there… hence the printing of the $700 B and the $10 T.

    But in fairness, this is an economic debate which I simply can’t address in detail. I just believe that fractional reserve banking is a problem and we should transition toward a full reserve banking system. Painful? Yes. But it’s pain now or pain later. I’d rather deal with the pain ourselves, rather than being beholden to our Chinese bankers who reside in Tiananmen Square.

  33. And the fraudulent Republican notion that Frank and Dodd wanted every poor person to own a house, and that’s the source of our current problems, — is a fabricated lie.

    “I don’t see anything to report that raises safety and soundness problems.” – Rep. Barney Frank (D-Ma.)

    “Under the outstanding leadership of Mr. Frank Raines, everything under the 1992 Act has worked just fine.” – Rep. Maxine Waters (D-Ca.)

    Notice a trend?

  34. Seems a tricky bill on which to hang a senator.

    It’s not a tricky bill, if you don’t look at party labels.

    For instance, Sanders, Feingold and Demint represent the people well – if in their own way. On the other hand, Lieberman, McConnell and Schumer represent special interests. So to me, these votes are never “tricky.” They’re actually quite telling.

  35. And FWIW, I can accept that my call for the elimination of credit cards goes nowhere. America isn’t there, so the Senate certainly won’t be there. This is a republic, not a dictatorship.

    But why Dodd is sitting on his hands on stuff like naming the banks… and openly opposing Bernie Sanders’ bill to Audit the Fed… well… it’s beyond me. It leaves me questioning the true motives of Dodd.

  36. Hooker, check out this great quote:

    Some of the critics of the Fed challenge the very notion that monetary policy should remain independent from Congress. “Monetary policy isn’t independent. It just has independence from democracy,” said one congressional aide whose boss is signed on to Paul’s bill, meaning that the Fed is not independent from political forces, just from Congress.

    Source?

    http://www.huffingtonpost.com/2009/06/11/federal-reserve-audit-sup_n_214004.html

  37. And another telling quote:

    Frank wants increased oversight of the Fed but also wants other nations to be assured that the Fed is independent in how it establishes monetary policy.

    Mr. Frank, please explain why you appear more concerned with appeasing China’s authoritarian regime than the right of the American people to know what happened to our money.

  38. And another fantastic quote:

    Paul spokesman Jesse Benton rejected the idea that the Fed is or should be independent, arguing it “wields tremendous power and should have full transparency and accountability to the American people. In response to the concerns about the Fed’s ‘independence, why would a body independent of politics’ hire a lobbyist?”

  39. btw, Frank does offer an explanation later in the article… but I don’t accept his explanation… I simply believe that Congress should represent America… not foreign nations. And while there is a problem… it’s a problem that was created by public policy… policies that were (presumably) supported by Frank over the past few decades.

    And now, instead of saying “I’m sorry.” The Political Class offers a smoke’n’mirrors show and never addresses the root cause of the problem… their own votes and inactions.

  40. Hooker,

    The links I provided are not revisionist history; they are what we in the news business call the first record of history and, as I said, it’s a mighty recent history at that. In claiming that you are not afflicted with memory loss, I am actually paying you a compliment – not denigrating members of your family who may have suffered from Alzheimer’s. Chris Dodd and Barney Frank were indeed largely responsible for the housing industry crash because they forced banks to lower their lending standards and adamantly refused to regulate to-big-to-fail Fannie, Freddie and Countrywide. In this, they at first found a willing partner in ex-President George Bush, and I never defended him for having been an economic dunce like Frank and Dodd. However, as the incomparable Dobb pointed out, prominent Republicans did indeed seek to regulate Fannie and Freddie, but they ran into a stone wall with Frank, whose boyfriend for a few years was a prominent business man high up in the Fannie or Freddie (I forget which) food chain. Dodd got special treatment from Countrywide. All this is well known; none of it is revisionist history – it’s just history.

  41. Thomas Hooker

    The links I provided are not revisionist history; they are what we in the news business call the first record of history and, as I said, it’s a mighty recent history at that…Chris Dodd and Barney Frank were indeed largely responsible for the housing industry crash because they forced banks to lower their lending standards and adamantly refused to regulate to-big-to-fail Fannie, Freddie and Countrywide. In this, they at first found a willing partner in ex-President George Bush, and I never defended him for having been an economic dunce like Frank and Dodd. However, as the incomparable Dobb pointed out, prominent Republicans did indeed seek to regulate Fannie and Freddie, but they ran into a stone wall with FrankAll this is well known; none of it is revisionist history – it’s just history.

    Once again, your argument that Dodd and Frank were responsible for the financial meltdown and housing crisis is patently absurd because they were not in power all those years, the Republicans were. Republican George Bush controlled the executive branch for the eight years before the crisis, not Barney Frank; the Republicans controlled congress for a dozen years, then blocked Democratic initiatives for the past two with Bush’s vetoes and record filibusters. It is simply laughable that you would continue to try to pin the economic troubles on two guys who chaired no committees, and whose party controlled neither house of the congress, nor the White House. It is delusional and borders on paranoia to continue to assert your bizarre argument that these two men created this crisis.

    One more time: The Democrats weren’t in charge all that time; the Republicans were. Dodd and Frank couldn’t stop any Republican initiatives on the economy or the financial system because they weren’t in power.

    Another thing. I find it sad that you and your fellow Republicans hammer away at Barney Frank because he is a homosexual. It is just one more manifestation of the bigotry that infects the Republican Party, the nativism that leads it to demonize Hispanic immigrants, that created and sustained the “Southern Strategy” designed to stir up and exploit Southern White animosity against African-Americans, and the actions to continue to demonize homosexuals. It’s no wonder that Blacks, Jews, Hispanics and Gays overwhelmingly vote Democratic.

    Yes, Barney Frank is gay. He is also a tremendous congressman. Your harping on his private life only serves to diminish your arguments.

  42. Thomas Hooker

    Sara, with all due respect… please take the time to at least begin to understand the Federal Reserve. A year ago, I didn’t have a clue. But at this point, it’s quite apparent to me that they are the heart of all these problems… and Dodd continues to protect them.

    Mr. White, in fact you should be praising the Fed’s independence. For it was an independent Federal Reserve under Paul Volker which, in 1979 decided to squeeze inflation out of the American economy and screeched the breaks on money growth, pushing it down to a punishing zero increase. That was what pushed interest rates up to near 20% in 1980 and led to Jimmy Carter’s defeat by Ronald Reagan. Though Volker’s brutal squeeze on liquidity also precipitated the worst recession since the Great Depression (though the current downturn is now worse), and it shrank Reagan’s popularity levels to single-term levels, the worst of the recession was over by 1982 and set up the recovery that Reagan rode into his second term. Now had the Fed been beholden to the White House or Congress, there is no way that Paul Volker could have taken the actions he did to stop inflation in its tracks that also created a major recession.

    So without independent Fed chairman Volker, there would have been no President Reagan. Do you still want to place the Fed and monetary policy under the White House’s control?

  43. Thomas Hooker

    But in fairness, this is an economic debate which I simply can’t address in detail. I just believe that fractional reserve banking is a problem and we should transition toward a full reserve banking system. Painful? Yes. But it’s pain now or pain later. I’d rather deal with the pain ourselves, rather than being beholden to our Chinese bankers who reside in Tiananmen Square.

    I don’t think that anyone is seriously blaming the Fed for the meltdown. Indeed, it was the Fed’s actions in injecting emergency liquidity and capital into the financial system that has clearly helped us avoid a 1930’s style depression. The government actually refused to extend liquidity to the banking system at the start of the Great Depression, which precipitated the domino effect of failing banks. We’ve all learned from that lesson- check that: Republicans have not learned from it, and are still clamoring for a Herbert Hoover-style balanced budget, no bailouts, and no federal assistance to hard-pressed Americans. Hoover’s actions led to six decades out of power in congress for the Republicans, save for two years with the “do nothing congress” under Truman. Good thing that Democrats are in control this time, and we’ve so far been able to avoid a complete meltdown.

  44. Thomas Hooker

    btw, Frank does offer an explanation later in the article… but I don’t accept his explanation… I simply believe that Congress should represent America… not foreign nations. And while there is a problem… it’s a problem that was created by public policy… policies that were (presumably) supported by Frank over the past few decades.

    Once again, Barney Frank was not in charge of Congress between January 1995 and January 2007, the Republicans were. Barney Frank wasn’t president between January 2001 and January 2009, Republican George Bush was. Let’s keep the facts straight here. You Republicans simply cannot blame a guy who wasn’t in power. You just cannot do it and expect to be taken seriously. It’s ludicrous.

  45. Thomas Hooker

    Why does Dodd oppose auditing the Federal Reserve?

    For what purpose is an audit needed? Doesn’t seem a big deal to me.

  46. Hooker, with regard to Volker… I simply don’t accept:

    1) fractional reserve banking
    2) fiat money; and the
    3) federal reserve

    as Constitutional. And with regard to your defense that the Fed has never been challenged on such grounds, I offer that’s because most elected rep’s (since 1913) have been as knowledgable about the Fed as Chris Dodd – largely clueless.

    Neither Volker, nor Reagan’s non-follow thru on sound money, are silver-lined dreams for me.

  47. Once again, Barney Frank was not in charge of Congress between January 1995 and January 2007, the Republicans were. Barney Frank wasn’t president between January 2001 and January 2009, Republican George Bush was. Let’s keep the facts straight here. You Republicans simply cannot blame a guy who wasn’t in power. You just cannot do it and expect to be taken seriously. It’s ludicrous.

    Please direct me to my comment that suggests I’m unilaterally blaming Dems for these problems. If you unable to do so, then I’ll repeat… it’s the Luxury Class / Political Class / Establishmentarians who are destroying America. And that is a bipartisan group of people who are in Washington to “get them theirs.”

    McConnell is as bad as Murtha. They both need to go, along with their cronies.

  48. For what purpose is an audit needed? Doesn’t seem a big deal to me.

    In less than four months, more than half of the House (222 as of yesterday) agreed that the Fed should be audited. Bernie Sanders and Jim Demint agree.

    Hooker, the more you write, the more it appears that you’re just an Establishmentarian… quite happy now that Dems run the show. This reminds me of a few of the other regular “liberals” here who HATED Bush, but are now content to continue maintain troops in Korea, Germany and elsewhere.

    I simply don’t understand that a thought process that suggests that things are good, simply because Dems run the show.

    I give credit to Scoop, Matt W, Ken K and others. They have different views from me… but they don’t drink the kool-aid just because it’s D-flavored.

  49. Thomas Hooker

    as Constitutional. And with regard to your defense that the Fed has never been challenged on such grounds, I offer that’s because most elected rep’s (since 1913) have been as knowledgable about the Fed as Chris Dodd – largely clueless.

    Can you tell me what prominent economists or constitutional law scholars have challendged the Fed’s constitutionality? If neither Republican-controlled nor Democratic-controlled congresses have ever challenged the Fed’s constitutionality, is it possible that your point of view is so far from defensible and rational that it constitutes a tiny fringe viewpoint?

    Neither Volker, nor Reagan’s non-follow thru on sound money, are silver-lined dreams for me.

    I don’t know what you mean by “sound money”. Are you recommending a return to the gold standard? Is that your concept of sound money?

  50. Thomas Hooker

    Hooker, the more you write, the more it appears that you’re just an Establishmentarian… quite happy now that Dems run the show. This reminds me of a few of the other regular “liberals” here who HATED Bush, but are now content to continue maintain troops in Korea, Germany and elsewhere.

    Could you define for all of us at this site what an “establishmentarian” is? It’s curious that I’m now called an establishmentarian when for a dozen years my party was out of power, and for the past eight years the other party’s president controlled the White House. In this state the other party has controlled the governor’s mansion for more than two decades. How is that “establishmentarian”? Sounds similar to Newt Gingrich’s remarks at the Prescott Bush dinner at which he stated that “we are drifting toward an elected aristocracy” (exact words?). It’s difficult to understand an elected aristocracy when President Obama grew up in the most un-aristocratic family imaginable, as did current Massachusetts governor Dannel Patrick, who grew up in poverty in Illinois, or the Supreme Court appointee Sotomayor, a child of immigrants from Puerto Rico.

    But if you could enlighten us about “establishmentarians”, I think we’d all appreciate it. Does it include all Republicans and Democrats? Who is excluded amongst current elected officials?

    I find it hard to fathom what my opposition to George W. Bush has to the maintenance of troops in Korea, who’ve been there since 1945 with the support of the majority of the South Korean people, and whose stationing there has been supported by every president, Democratic and Republican, for more than six decades. Our stationing of large numbers of troops in Germany is certainly becoming an anacronism, given the demise of the Soviet Bloc and the Warsaw Pact. But again, our troops have been there, with European approval, under Democratic and Republican presidents since 1944. Where is the connection with George Bush and those who opposed him?

  51. Thomas Hooker

    I simply don’t understand that a thought process that suggests that things are good, simply because Dems run the show.

    If you look at the overwhelming percentage of Americans who thought America was on the wrong track in October 2008 versus the majority who now believe that America is on the right track, you will see that there has been a sea change since President Obama has taken office and a Democratic agenda now prevails. So you can place me in that strong majority of Americans who believe that the country has changed for the better now that Republicans are no longer in charge. You might also quote the 21% of Americans identifying themselves as Republicans, an all-time low, I understand. And you might also quote the figures showing far greater approval for the Democratic Party, versus over 70% disapproval for the Republican Party. And Nancy Pelosi’s approval ratings are roughly two and a half times higher than those for John Boehner.

    Shouldn’t you acknowledge the fact that the American people have turned decisively away from Republican control and are now, quite simply, far happier that Democrats are governing? Has the majority of the American people “drunk the kool-aid”? Or is the problem with the Republican Party’s record of governance on the national stage? Is it the Republicans themselves who have “drunk the kool-aid”, and simply cannot understand that the rest of the country has left them far behind?

  52. immigrants from Puerto Rico.

    “immigrants”??

    They have been natural born Americans since The Treaty of Paris, 12/10/1898

  53. But in fairness, this is an economic debate which I simply can’t address in detail. I just believe that fractional reserve banking is a problem and we should transition toward a full reserve banking system. Painful? Yes. But it’s pain now or pain later. I’d rather deal with the pain ourselves, rather than being beholden to our Chinese bankers who reside in Tiananmen Square.

    Alright, I’ll bite. First, allow me to state what I believe full reserve banking to be. Right now, you deposit $100 at your local bank. They loan out say, $90, to someone who needs loans to expand their business, buy a house, buy a car, whatever. This process is repeated with the thousands of customers. A few customers deposit money into CDs, guaranteeing they won’t withdraw for 1 year or 2 years or whatever.

    So the bank has 10% of the deposits on-hand, either in the cash drawer, or available nearly instantly because they are in short term deposits. Now, it’s very likely that on any given day, no where near 10% of the deposits are going to be withdrawn. But in case that does happen, or even gets close, the central bank will step in and make emergency loans to the bank to keep them liquid. Should the problem persist, the central bank will force the bank to merge with a larger bank (and will make the terms attractive for the other bank). The government guarantees deposits, so there isn’t a bank run. There are “reserve requirements” that require a certain percentage of deposits to be liquid, and there are capital requirements, that require equity in the bank (when you start a bank, you just can’t take deposits and then loan them out, you’ve got to put in equity capital that is essentially what will be lost if there are bad loans). The bank makes profits by charging more on the interest from what is loaned out than it what it pays in interest on what is on deposit (furthermore, banks make money by charging overdraft fees and the like). Banks lose money when they loan money and the money isn’t paid back.

    So now let’s take a look at full reserve banking, which you advocate in about every other session here on CTLP. My understanding is that under full reserve banking, a bank takes money. However, any demand deposits, which would be any type of checking accounts or whatever, couldn’t be used to loan money out. The only thing that could be loaned out would be CDs. If you deposit money into a CD account, you guaantee not to withdraw it for one year (or whatever time period). Thus, the bank could loan that money out for one year. But unless the depositor stipulated that the bank could hold his or her money for a set period, it would not be able to be loaned out.

    Who practices full reserve banking now? No one. Some Dutch bank was the last bank to do it, and they stopped the practice in the early 1800s (in practice, they were really more of a storage center, charging people to keep their gold there under safe keeping).

    So seriously, how would full reserve banking work? There’d be almost no loans made by banks. How would banks make money under such a system? Like it or not, credit is a key component to our economy. Morgages, business loans, home equity lines of credit, car loans, etc. Those would all have to be taken up by non bank entities.

    And I haven’t even talked about the cost of actually converting to a system from where we are now. Seriously, if we went to full reserve banking, even somewhat gradually (in effect, you’d raise the reserve requirement from 10% in my example up to 100%, and 10% was just an example), how would that not bring the total collapse of the US economy?

    Even in the Austrian school of economics, there’s no consensus on this.

    Also, would you prevent say money market funds from making loans? Because money market funds essentially pool depositor money and make loans (in the form of short term commercial paper). Or would you just prevent loans altogether, except person-to-person with no intermediaries?

    Sure, if loans had been banned, we wouldn’t have had a credit meltdown in 2008. We’d also probably be riding around in horse and buggies because there’d have been no innovation for the past 200 years.

    The credit markets didn’t collapse because of fractional reserve banking. They collapsed because both parties in DC decided to recklessly promote expansion of home ownership, both through government sponsored entities and by making it difficult for banks that did not extend credit to mortgages that really should never have been considered credit-worthy. There were also other factors at play, of course, but I don’t think you can blame it on fractional reserve banking. Attacking fractional reserve banking seems like you are advocating a very primitive banking system (that of course wouldn’t have nay crises, because it wouldn’t really exist).

  54. If neither Republican-controlled nor Democratic-controlled congresses have ever challenged the Fed’s constitutionality, is it possible that your point of view is so far from defensible and rational that it constitutes a tiny fringe viewpoint?

    That is possible. But I believe the more likely issue is not that I hold a “fringe viewpoint,” but rather that I hold a viewpoint. Most elected officials in Washington have been simply oblivious to the monetary policy for the past century.

  55. And I’m not going to bother linking anything, but if you read the press coverage of HR 1207 you will see comments about how elected officials are just beginning to recognize the existence of monetayr policy and trying to come up to speed asap.

    Anecdotally, I recall a recent liberal blog hammering Michelle Bachmann for referring to something like “the end of the US Dollar as the world’s currency.” She was taken to task for not saying “the world’s reserve currency.”

    And another story… during spring 2008 and the heat of the POTUS primaries, I recall MSNBCs First Read offering a glimpse into the media by acknowledging that one of the problems with Ron Paul’s message was that he spoke about the economy often, including issues such as the Fed, fiat money and fractional reserve banking. And that was a problem for Paul because (as MSNBC explained) reporters generally don’t care about economics, don’t understand economics and would simply prefer to focus on stuff like “what did Romney mean when he said…”

  56. a gold standard is a form of sound money, but no… bimetallism would be fine, I guess. Truthfully, until America opens this discussion (and it likely won’t happen with Dodd running banking), I don’t know all the possibilities. I just know that printing $10 trillion and not letting the American people know what happened to their money is morally reprehensible. And we need to stop the printing presses.

    My parents taught me money doesn’t grow on trees. Did my parents lie to me?

  57. Exchange the word “establishmentarian” for “political class” (as I’ve noted before) and read this Rasmussen poll:

    55% of Americans Are Populist, 7% Support the Political Class

    http://www.rasmussenreports.com/public_content/politics/ideology/55_of_americans_are_populist_7_support_the_political_class

    I think Rasmussen offers a pretty good description. And yes, strictly in relation to this post, I view you as a member of the Political Class… along with most insiders… R & D alike in Washington.

  58. Shouldn’t you acknowledge the fact that the American people have turned decisively away from Republican control and are now, quite simply, far happier that Democrats are governing? Has the majority of the American people “drunk the kool-aid”? Or is the problem with the Republican Party’s record of governance on the national stage? Is it the Republicans themselves who have “drunk the kool-aid”, and simply cannot understand that the rest of the country has left them far behind?

    Monetary policy (the existence of the Fed, fiat money, fractional reserve banking and other issues) has not been debated in America since 1913.

    When it comes to monetary policy, to suggest that the American people have drunk the kool-aid is absurd. My guess is that most people don’t even know the phrase “monetary policy.” I fault the Political Class for that.

  59. When it comes to the basics of auditing the Fed:

    Kucinich
    Paul
    Demint
    Sanders

    all agree. The American people need to know.

    Unfortunately, Pelosi, Reid, Dodd and other members of the Political Class stand in the way.

    I hope that a good freshman Dem like Alan Grayson has the political courage to push forward, despite the presumed threats of retaliation from his leadership… and demand accountability.

  60. need = have the right

  61. btw, I apologize for saying you were drinking the kool-aid. It was unnecessary. I was tired and wasn’t in a good mood last night…. not that it’s an excuse. I oughta reserve those comments for elected officials.

  62. Thomas Hooker

    Monetary policy (the existence of the Fed, fiat money, fractional reserve banking and other issues) has not been debated in America since 1913.

    That comes as a bit of a surprise to me, since I noted robust debate over monetary policy in the economics classes I took in college and graduate school. There has similarly been a robust debate over the relative merits of neo-Keynesianism versus Monetarism, particularly Milton Friedman’s monetarism, which has largely formed the basis for Republican fiscal policy for decades. Economists who watch the Fed have hotly debated what should be the objectives of Fed policy, either managing money supply growth, or targetting inflation.

    My parents taught me money doesn’t grow on trees. Did my parents lie to me?

    Actually, yes, a little bit. The Fed does have the ability to create money through its open market operations. And it has the ability to stop the creation of money, as did Volker in 1979, even when the economy is clamoring for it. The balance between real growth and price growth on the one hand and inflation and, occasionally as we experienced late last year and still this year, deflation, is a delicate one which we are still learning how to manage.

    But the debate over the absolute necessity for central banks to print money at times of massive financial collapse has not been disputed for many, many years. Indeed, central bank liquidity creation helped avoid financial crisis several times in recent years, including the 1987 stockmarket crash (when the Dow dropped a third in one day), during the unwinding of Long Term Asset Management, during the Asian financial crisis of the late ’90’s, and now during our financial meltdown that Alan Greenspan called a “once in a century” crisis. Had our central bank not created massive quantities of liquidity, we would be lucky to be riding horseback right now, and burning twigs for heat. It was that close and the situation remains dangerous.

    Apparently, only some conservative Republicans and a bizarre group of pseudo-economists at the American Enterprise Institute actually believe the contrary. But serious economists at reputable universities don’t dispute it.

  63. I’m sure it’s completely irrelevant that this economic crash didn’t begin until the Democrats took control of congress after the 2006 elections.

    Naturally, everything is the Republicans fault and even today when Obama and the Democrats completely control Washington and our economy is sinking deep and fast….it’s still the Republicans fault.

    Finally, here in CT where Democrats have a SUPER MAJORITY in both the House and Senate and the power to what ever they want including over ride any veto from the Governor, the reason we don’t have a budget? Rell, the Republican.

    Finally, I understand how Democrats think!

  64. Thomas Hooker

    http://www.rasmussenreports.com/public_content/politics/ideology/55_of_americans_are_populist_7_support_the_political_class

    http://www.rasmussenreports.com/public_content/politics/ideology/55_of_americans_are_populist_7_support_the_political_class

    I think Rasmussen offers a pretty good description. And yes, strictly in relation to this post, I view you as a member of the Political Class… along with most insiders… R & D alike in Washington.

    Here’s how Rasmussen created an index of “mainstream” versus “political class”:

    “The questions used to calculate the Index are:

    “– Generally speaking, when it comes to important national issues, whose judgment do you trust more – the American people or America’s political leaders?

    “– Some people believe that the federal government has become a special interest group that looks out primarily for its own interests. Has the federal government become a special interest group?

    “– Do government and big business often work together in ways that hurt consumers and investors?

    “To create a scale, each response earns a plus 1 for the populist answer, a minus 1 for the political class answer, and a 0 for not sure.

    “Those who score 2 or higher are considered a populist or part of the Mainstream. Those who score -2 or lower are considered to be aligned with the Political Class. Those who score +1 or -1 are considered leaners in one direction or the other.

    “In practical terms, if someone is classified with the Mainstream, they agree with the mainstream view on at least two of the three questions and don’t agree with the Political Class on any.”

    What a bizarre, truly weird, paranoid way to delineate political views in America. I can’t see how Rasmussen would have wasted their time with this, and I’d be curious who sponsored the survey. I think that most people would scratch their heads over being classified as being populist/mainstream versus supporters of the “political class”. And since those considering themselves “mainstream” in this survey are virtually equally distributed between Republicans and Democrats, it seems that something is very wrong with the survey. There are major differences between R’s and D’s, but mainstream versus political class is not one that most Americans will recognize.

  65. Thomas Hooker

    http://www.dailykos.com/storyonly/2009/6/5/12445/91740

    Sorry. Here’s the link to the results of the Research 2000 poll showing Pelosi/Boehner popularity, R v D approval etcetera.

  66. Thomas Hooker

    I’m sure it’s completely irrelevant that this economic crash didn’t begin until the Democrats took control of congress after the 2006 elections.

    Well, if one thinks that this once-in-a-century financial meltdown came about as if a spontaneous implosion, then it might make sense to blame Democratic government. But it seems more likely that it was the result of longer-term events that culminated in the implosion. Curiously, Paul Krugman suggested recently that the housing implosion was a long time in the making and that it was simply a matter of the Republicans’ holding the White House chair at the time that the music stopped that led to their being blamed for it. By the same token, he believes that the Labor Party in Britain is taking the blame over there for what is a global meltdown. I would be a bit less forgiving.

    First, let’s recall that Bush policies nearly doubled the federal debt over the past eight years, and, as Frank Rich pointed out today, he added far more debt than has President Obama in his 143 days in office. Then there is President Bush’s record on job creation, ranking as the only president to preside over negative private sector job growth during his first term since Herbert Hoover. It was abysmal during his second term as well, ranking far below average monthly increases during the eight years under Bill Clinton. Then there was the more than tripling of the oil price under Bush. Then we take a look at the lack of regulation of derivatives under Bush and the Republican congress. Even though the bills deconstructing the Glass-Steigel separations between investment banking and commercial banking began to come down during the Clinton administration, the Bush administration and the Republican congress had several years to see how the financial system was developing and reverse course.

    If one can point to economic or regulatory changes enacted during the eleven months between the accession of Democrats to control of Congress and the beginning of this, the longest recession in American history since the Great Depression, then by all means tell us about it. But simply pointing the finger at Barney Frank and Chris Dodd when they were out of power for most of this period leading up to the meltdown just doesn’t make sense. And with Bush and the iflibustering Republicans blocking Democrats at every turn for the past two years, it simply is not credible to try to place this economic crisis at the doorstep of the Democrats. But if you can come up with specific actions the Democrats took to cause it, we’re all ears!

    Naturally, everything is the Republicans fault and even today when Obama and the Democrats completely control Washington and our economy is sinking deep and fast….it’s still the Republicans fault.

    Finally, I understand how Democrats think!

    I think we Democrats try to look at things rationally, looking for facts, and not grasping for ideology.

  67. Hooker, you keep asking me to further explain my assertions… like say accusing Dodd of lying.

    Please explain your wild assertions about the dire consequences of Long Term (Capital??) Mgt and Asia in the 90s. Seriously… if LT failed, it would not have been the end of civilization as we know it… as Arianna Huff likes to describe the usual mantra of Obama’s economic team – Bernanke & Geithner.

  68. And if you’re going to invoke Greenspan, then please reconcile your apparent mocking of a gold standard and this autumn 2007 clip of Greenspan:

  69. by most accounts I’ve read, Greenspan wants a return to honest money… at the end of the clip he says he really liked the 1870 to 1914 era.

    And for any lurkers who are still following this thread, I think it’s generally accepted that the 1860s saw a lot money growing on trees… for reasons you can probably divine. Then on Dec 23 1913, the Federal Reserve was born (gack!).

  70. Thomas Hooker

    by most accounts I’ve read, Greenspan wants a return to honest money… at the end of the clip he says he really liked the 1870 to 1914 era.

    You will also note that America relied on import duties for most of its federal revenues during that period. But when WW I came upon us, we realized that we needed more revenues than were afforded by import duties, particularly with shipping being blasted by U-Boats. Today international trade is small compared with the size of the economy, so a return to import duties to fund our standing military establishment and everything else is just not practicable.

    I think a perusal of economic statistics shows that central banks have learned how to control inflation over the past few decades without returning to a gold standard, and that global economic growth has not suffered from a lack of a metal standard, either silver or gold. I don’t think we need to revisit the clash between the silver miners in the west and eastern indusrialists’ championing of the gold standard that William Jennings Bryant made a central part of his campaigns so long ago. Economics has moved beyond that.

  71. But when WW I came upon us, we realized that we needed more revenues than were afforded by import duties,

    Hooker… you’re suggesting we need more than import duties because we need to support the Military-Industrial Complex? Did you support / oppose Lieberman in 2006? Or is it with the exception of Iraq, the US should be policing the world?

    I think a perusal of economic statistics shows that central banks have learned how to control inflation over the past few decades without returning to a gold standard, and that global economic growth has not suffered from a lack of a metal standard, either silver or gold. I don’t think we need to revisit the clash between the silver miners in the west and eastern indusrialists’ championing of the gold standard that William Jennings Bryant made a central part of his campaigns so long ago. Economics has moved beyond that.

    Economic stats? Lemme guess… your stats ended on Sept 18, 2008? Or was it March 26, 2008 (the day before Bear)? I offer that the house of cards is falling before our very eyes. Within a few years, we’ll wake up and see the Dragon has awakened… oh wait… he already did… did you notice the Sino-American naval skirmish a few months back? The US upset China in some waters near China… then China says it’s concerned about all the money growing on trees in the US… then Obama offers some assurances about the safety and value of the dollar.

    What happened? As they did with the Fannie / Freddie bailout, China demonstrated their increasing strength and showed that in many ways, they already direct the POTUS.

    And while the Political Class accepts this, I don’t.

    Two words: Tiananmen Square.

  72. Thomas Hooker

    What happened? As they did with the Fannie / Freddie bailout, China demonstrated their increasing strength and showed that in many ways, they already direct the POTUS.

    And while the Political Class accepts this, I don’t.

    Two words: Tiananmen Square.

    So are you advocating invading China? Nuke-ing China? China’s economic emergence and vibrancy is a fact. China has been the fastest-growing economy in the world for the past three decades. Is the country’s economic growth likely to support growing military strength? Absolutely. But is the answer military confrontation? If so, are you willing to initiate a thermonuclear war?

    What do you mean when you write that you won’t accept this?

  73. Thomas Hooker

    Hooker… you’re suggesting we need more than import duties because we need to support the Military-Industrial Complex? Did you support / oppose Lieberman in 2006? Or is it with the exception of Iraq, the US should be policing the world?

    I certainly opposed Lieberman and continue to oppose him and the senseless invasion of Iraq. But our expenditures for the war there were only a fraction of overall military spending. I believe that we can substantially cut our military spending, which is higher than the next forty countries’ spending combined, and those forty-odd countries include many of our allies. But we simply cannot finance modern government by levying high tariffs on imports, and conservatives would not stand for returning to the protection of domestic industries with high tariff barriers, the dismantling of which they’ve championed for decades.

  74. Thomas Hooker

    Economic stats? Lemme guess… your stats ended on Sept 18, 2008? Or was it March 26, 2008 (the day before Bear)? I offer that the house of cards is falling before our very eyes.

    In fact, economic data subsequent to those dates suggest that we’re suffering a period of deflation, with falling private borrowing and massive layoffs that are higher in percentage terms than experienced during the Volker-initiated recession of the early 1980’s.

  75. a gold standard is a form of sound money, but no… bimetallism would be fine, I guess. Truthfully, until America opens this discussion (and it likely won’t happen with Dodd running banking), I don’t know all the possibilities. I just know that printing $10 trillion and not letting the American people know what happened to their money is morally reprehensible. And we need to stop the printing presses.

    A gold standard could work. A bimetal system would be an absolute disaster. With a bimetal standard, you in effect fix the price of silver (or whatever) relative to the price of gold. But if the output of silver should rise, you’ll quickly drain your treasury of gold, and if the output of gold should rise, silver would be drained from the treasury.

    With a gold standard, you’d need a fractional gold standard, which what most countries had befor e WWI. So if you had a 3:1 fractional system, and set an ounce of gold = $1,000, then when someone brought an ounce of gold to the treasury, the treausry would give them newly printed $1,000 in notes, but it would also pump $2,000 additional into the economy. When someone went to the window with $1,000 for an ounce of gold, the treasury would give them an ounce of gold, and then it would basically burn the $1,000 in cash. It would also reduce the money supply by $2,000.

    While the gold standard may be a nice intellectual exercise, it isn’t going to happen. Bimetalism is just nuts, even solely on an intellectual level.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s