This thread is valuable for anyone really, but particularly directed at certain Dutch and German members of our forum who are living in economic lalaland and are in dire need of some basic understanding of economic principles.
I have searched for quite a while and have finally come across a great video on the internet:https://www.youtube.com/watch?v=PHe0bXAIuk0
In this video, it is very plainly and graphically explained why...
- boom-bust cycles are created by central banks
- those boom-bust cycles can not over the long term outperform productivity growth (making central banks rather pointless in essence)
- our current low interest rates are a big problem
- social tensions result from central banking boom-cust cycles.
In summary, the video (unintentionally I am sure considering who had it produced) makes a very good argument for abolishing the Fed.
Watch and learn.
I am going to have to highlight the hypocrisy present in this opening statement
1. Boom -Bust cycles are not created by central banks, they are created by supply and demand. When supply is low, demand is high, and suppliers work to increase supply. If the demand is inelastic or elastic (underwear) eventually equilibrium is reached, and the suppliers stop producing as much. However all of this presents winners and losers, and potentially boom and busts , which a central bank or legislation if run correctly can help smooth out.
2. Long term is subjective. In the long term breaking up AT&T did no good, but it sure helped in the 80's and 90's
3. The current low interest is a problem, as coupled with the tax cuts it threatens to create much of the same issues that led to the 2007 recession.
4. Social tensions are magnified under boom bust cycles. They are not the result of them. Social tensions are the result of people not paying attention to what others are doing, and then not caring when they stomp on other's rights.
Abolishing the Fed makes no sense, as monetary policy has to be there for the short term to fix overheated markets where demand is outstripping supply, and when supply is outpacing demand.