"living wills" of 5 banks fail to pass muster

[Rob L 3,811]

No I did not advocate it. I advocate breaking up the FED

I don't know where you see self interest. Why would any of it matter to me one way or the other?

Of course I care about the grand scheme of things. Just because I see it differently than you and have a different opinion of what would be better for the economy, the markets or the country as a whole doesn't mean I don't care.

When you say breaking up the Federal Reserve, what does that look like exactly?

Regional banks belonging to their federal region issuing their own currency?

State Chartered banks issuing their own currency?

Free banking with each bank issuing its own , presumably unregulated notes?

Where does the insurance for these banks lie?

How will you insure that my dollar in Seattle will spend well in Florida?

[Jacque67 7,328]

When you say breaking up the Federal Reserve, what does that look like exactly?

Regional banks belonging to their federal region issuing their own currency?

State Chartered banks issuing their own currency?

Free banking with each bank issuing its own , presumably unregulated notes?

Where does the insurance for these banks lie?

How will you insure that my dollar in Seattle will spend well in Florida?

Plus 10 million!

[OriZ 3,165]

When you say breaking up the Federal Reserve, what does that look like exactly?

Regional banks belonging to their federal region issuing their own currency?

State Chartered banks issuing their own currency?

Free banking with each bank issuing its own , presumably unregulated notes?

Where does the insurance for these banks lie?

How will you insure that my dollar in Seattle will spend well in Florida?

OH! Thanks for being civil.

Before the FED, yes banks were issuing their own currencies. I am not saying this was flawless. Nor am I saying there should not be a central body to issue notes. That is part of why the FED was created -

After the panic of 1907 president Wilson signed away the last veneer of control over the money supply to a cartel. A well organized gang of crooks so successful, so well cunning, so hidden that even now, a century later, few know of its existence, let alone the details of its operations. But those details have been openly admitted for decades.

https://www.corbettreport.com/federalreserve/

The problems of pre-1914 banking in the US involved too many government restrictions, not too few. Politicians may have believed that private banking was unstable, but had they looked to the Canadian model(at the time) as a guide, they could have concluded that market forces can give us a successful banking and monetary system just as it provides us with food, clothing and other necessities. The FED took the power of money creation from the government and gave it to the bankers. Now the only way the government can inject more money into the economy is by going into more debt. So every single year, hundreds of billions of dollars in profit are made lending money to the US government. The US national debt problem simply cannot be fixed under the current system. It has been mathematically designed to expand forever; A trap from which there is no escape. Many libs won't listen because they don't really care about ever paying off the debt, and most conservatives won't listen because they are convinced we can solve the national debt problem if we just get a bunch of good conservatives into positions of power, but the truth is we have such a horrific debt problem because it was designed to be this way from the beginning.

So the US government could have issued debt free money all this time, and have a national debt of 0. If the government could issue debt free money, it is conceivable that we would not even need the IRS. The US did just fine for well over 100 years without a national income tax. It is no coincidence that about the same time that the FED came about, a national income tax was instituted as well. The whole idea was that the wealth of the American people would be transferred to the US government and then to the hands of the ultra wealthy in the form of interest payments. Over the last several years, the fed has been giving gigantic piles of nearly interest free money to wall st banks which they turned right around and not only bought risky assets with, thus creating the third bubble in 16 years, but also started lending to the federal government at a much higher rate of return.

If the FED didn't exist, we would have an economy with little to no inflation. The Federal reserve system is designed to be inflationary. That is why they have a target of 2%, which lower than that and you have a risk of deflation obviously, but they hold interest rates near 0% because that's where they want to see inflation is at 2% or above. The problem is, they tend to overshoot alot. Take a look at this chart and where inflation was before 1913 and after.

There is a reason why so many of the most prominent politicians from the early years of the united states were opposed to having a central bank. Here's a quote from Feb 1834 by President Andrew Jackson about the evils of central banking:

I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.

But we didn't listen to men like Jackson. We allowed the fed to be created in 1913 and we have allowed it to develop into an absolute monstrosity over the past century. And now we have to keep feeding the monster. In Greek Mythology there was a monster called Cerberus, the hound of Hades. Today central banks have taken on the role of feeding our own modern day cerberus to keep all the troubles away. Ever since the financial crisis cerberus has been chained to a wall, but he's pulling and he's growling and he's demanding ever more attention. But in the process of feeding Cerberus with ever lower rates and stimulus central banks keep making him stronger and fiercer and ever more aggressive. But worse, central banks are running out of food to feed the monster.

Regardless, even if you don't exactly end the fed, you can at the very least change its mandate; for example It can still issue notes or insure banks, but take the FOMC out of the picture, etc. The FOMC is disastrous. It should not be a central bank's job to create "maximum employment, stable prices, and moderate long-term interest rates" as its dual mandate currently states. The Fed's role grew from providing emergency reserve of money for the economy, to include setting certain interest rates(although they don't actually do that but the market does), controlling inflation, regulating banks, and then lastly and the most recent addition, "reaching full employment".

So what do I think should be done? The first step would be to repeal the 1913 law, and the subsequent amendments, that set up the current federal reserve. What comes in place depends on who you ask. Some people think we should go back to the gold standard. The amount of money in the economy would then be entrusted to the supply of gold in the world and cut down on anyone's ability to increase dollars pumped into the economy. This is certainly better than 'fiat money'.

However while the gold standard brings price stability, it also acts as a limit on economic growth, the money supply is based on the production of gold. Another option is the treasury department. Another option is an independent body, but not the fed, and not with the fed's current mandates.

[OriZ 3,165]

Plus 10 million!

That's how you ask a legitimate question.

[Jacque67 7,328]

[Póg mo 1,749]

OH! Thanks for being civil.

Before the FED, yes banks were issuing their own currencies. I am not saying this was flawless. Nor am I saying there should not be a central body to issue notes. That is part of why the FED was created -

After the panic of 1907 president Wilson signed away the last veneer of control over the money supply to a cartel. A well organized gang of crooks so successful, so well cunning, so hidden that even now, a century later, few know of its existence, let alone the details of its operations. But those details have been openly admitted for decades.

https://www.corbettreport.com/federalreserve/

The problems of pre-1914 banking in the US involved too many government restrictions, not too few. Politicians may have believed that private banking was unstable, but had they looked to the Canadian model(at the time) as a guide, they could have concluded that market forces can give us a successful banking and monetary system just as it provides us with food, clothing and other necessities. The FED took the power of money creation from the government and gave it to the bankers. Now the only way the government can inject more money into the economy is by going into more debt. So every single year, hundreds of billions of dollars in profit are made lending money to the US government. The US national debt problem simply cannot be fixed under the current system. It has been mathematically designed to expand forever; A trap from which there is no escape. Many libs won't listen because they don't really care about ever paying off the debt, and most conservatives won't listen because they are convinced we can solve the national debt problem if we just get a bunch of good conservatives into positions of power, but the truth is we have such a horrific debt problem because it was designed to be this way from the beginning.

So the US government could have issued debt free money all this time, and have a national debt of 0. If the government could issue debt free money, it is conceivable that we would not even need the IRS. The US did just fine for well over 100 years without a national income tax. It is no coincidence that about the same time that the FED came about, a national income tax was instituted as well. The whole idea was that the wealth of the American people would be transferred to the US government and then to the hands of the ultra wealthy in the form of interest payments. Over the last several years, the fed has been giving gigantic piles of nearly interest free money to wall st banks which they turned right around and not only bought risky assets with, thus creating the third bubble in 16 years, but also started lending to the federal government at a much higher rate of return.

If the FED didn't exist, we would have an economy with little to no inflation. The Federal reserve system is designed to be inflationary. That is why they have a target of 2%, which lower than that and you have a risk of deflation obviously, but they hold interest rates near 0% because that's where they want to see inflation is at 2% or above. The problem is, they tend to overshoot alot. Take a look at this chart and where inflation was before 1913 and after.

There is a reason why so many of the most prominent politicians from the early years of the united states were opposed to having a central bank. Here's a quote from Feb 1834 by President Andrew Jackson about the evils of central banking:

I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.

But we didn't listen to men like Jackson. We allowed the fed to be created in 1913 and we have allowed it to develop into an absolute monstrosity over the past century. And now we have to keep feeding the monster. In Greek Mythology there was a monster called Cerberus, the hound of Hades. Today central banks have taken on the role of feeding our own modern day cerberus to keep all the troubles away. Ever since the financial crisis cerberus has been chained to a wall, but he's pulling and he's growling and he's demanding ever more attention. But in the process of feeding Cerberus with ever lower rates and stimulus central banks keep making him stronger and fiercer and ever more aggressive. But worse, central banks are running out of food to feed the monster.

Regardless, even if you don't exactly end the fed, you can at the very least change its mandate; for example It can still issue notes or insure banks, but take the FOMC out of the picture, etc. The FOMC is disastrous. It should not be a central bank's job to create "maximum employment, stable prices, and moderate long-term interest rates" as its dual mandate currently states. The Fed's role grew from providing emergency reserve of money for the economy, to include setting certain interest rates(although they don't actually do that but the market does), controlling inflation, regulating banks, and then lastly and the most recent addition, "reaching full employment".

So what do I think should be done? The first step would be to repeal the 1913 law, and the subsequent amendments, that set up the current federal reserve. What comes in place depends on who you ask. Some people think we should go back to the gold standard. The amount of money in the economy would then be entrusted to the supply of gold in the world and cut down on anyone's ability to increase dollars pumped into the economy. This is certainly better than 'fiat money'.

However while the gold standard brings price stability, it also acts as a limit on economic growth, the money supply is based on the production of gold. Another option is the treasury department. Another option is an independent body, but not the fed, and not with the fed's current mandates.

While I don't like the FED as much as the next guy, I am not sure that I agree that we should go back to the gold standard. From Wikipedia:

From about 1921, Britain had started a slow economic recovery from the war and the subsequent slump. But in April 1925, the Conservative Chancellor of the Exchequer, Winston Churchill, on advice from the Bank of England, restored the Pound Sterling to the gold standard at its prewar exchange rate of $4.86 US dollars to one pound. This made the pound convertible to its value in gold, but at a level that made British exports more expensive on world markets. The price of gold was over-estimated by 10-14% leading to coal and steel as an export becoming less competitive. The economic recovery was immediately slowed. To offset the effects of the high exchange rate, the export industries tried to cut costs by lowering workers' wages.

The industrial areas spent the rest of the 1920s in recession, and these industries received little investment or modernisation. Throughout the 1920s, unemployment stayed at a steady one million.

https://en.m.wikipedia.org/wiki/Great_Depression_in_the_United_Kingdom

[Rob L 3,811]

To level set: the original context of this thread was whether the banks deemed to "big to fail" are at risk, which puts all of us (globally) at risk. The conversation shifted away from that discussion to what is deemed by some the root of the problem, Central Banking, specifically the special influence of the Federal Reserve of the United States. The original topic remains unaddressed by the Central Bank side show.

Lets break this down

The problems of pre-1914 banking in the US involved too many government restrictions, not too few.

So government restrictions on banks pre 1914 were at fault for recessions, depressions and panics? Are you bringing data on this?

Politicians may have believed that private banking was unstable, but had they looked to the Canadian model(at the time) as a guide, they could have concluded that market forces can give us a successful banking and monetary system just as it provides us with food, clothing and other necessities

And yet in 1935 Canada moved to a Central bank model with all shares owned by the Minister of finance. A move that has proven to be very successful (see recession of 2008 as one example)

Many libs won't listen because they don't really care about ever paying off the debt, and most conservatives won't listen because they are convinced we can solve the national debt problem if we just get a bunch of good conservatives into positions of power, but the truth is we have such a horrific debt problem because it was designed to be this way from the beginning.

Do we in fact have a horrific debt problem? I question that. I think we have a horrific deficit problem that requires congress to align spending with income, a political problem. Not sure what the Fed can do for that one except preach. The net effective tax revenues in the the US are far below those in western economies which is remarkable considering the % of International defense expenditure and our recent predilection for going to war.

If the FED didn't exist, we would have an economy with little to no inflation. The Federal reserve system is designed to be inflationary.

You and I must not have the same definition of inflation, because inflation goes back much further than the creation of the Fed, what is remarkable under the Fed is the lack of Deflationary periods

So what do I think should be done? The first step would be to repeal the 1913 law, and the subsequent amendments, that set up the current federal reserve.

You and I seriously disagree here. The first step (if we agree to abolish the Fed) is to create a plan for what system would take its place. What has not been put forward here is any reasonable plan to replace the Fed. Another Central Bank ? What governs that bank? Who governs that bank? How are you going to insure the dollars stability, which is something everyone on the globe depends upon.

An finally how does any of this address the need to understand what these large private banking concerns are doing to ensure we do not repeat the last crisis?

[Rob L 3,811]

What...no one wants to challenge my assertions?

I do not have a degree in econ and know nothing about the technical workings of banks, I should be easy fodder.

perhaps I need to adopt a condescending tone?

To level set: the original context of this thread was whether the banks deemed to "big to fail" are at risk, which puts all of us (globally) at risk. The conversation shifted away from that discussion to what is deemed by some the root of the problem, Central Banking, specifically the special influence of the Federal Reserve of the United States. The original topic remains unaddressed by the Central Bank side show.

Lets break this down

The problems of pre-1914 banking in the US involved too many government restrictions, not too few.

So government restrictions on banks pre 1914 were at fault for recessions, depressions and panics? Are you bringing data on this?

Politicians may have believed that private banking was unstable, but had they looked to the Canadian model(at the time) as a guide, they could have concluded that market forces can give us a successful banking and monetary system just as it provides us with food, clothing and other necessities

And yet in 1935 Canada moved to a Central bank model with all shares owned by the Minister of finance. A move that has proven to be very successful (see recession of 2008 as one example)

Many libs won't listen because they don't really care about ever paying off the debt, and most conservatives won't listen because they are convinced we can solve the national debt problem if we just get a bunch of good conservatives into positions of power, but the truth is we have such a horrific debt problem because it was designed to be this way from the beginning.

Do we in fact have a horrific debt problem? I question that. I think we have a horrific deficit problem that requires congress to align spending with income, a political problem. Not sure what the Fed can do for that one except preach. The net effective tax revenues in the the US are far below those in western economies which is remarkable considering the % of International defense expenditure and our recent predilection for going to war.

If the FED didn't exist, we would have an economy with little to no inflation. The Federal reserve system is designed to be inflationary.

You and I must not have the same definition of inflation, because inflation goes back much further than the creation of the Fed, what is remarkable under the Fed is the lack of Deflationary periods

So what do I think should be done? The first step would be to repeal the 1913 law, and the subsequent amendments, that set up the current federal reserve.

You and I seriously disagree here. The first step (if we agree to abolish the Fed) is to create a plan for what system would take its place. What has not been put forward here is any reasonable plan to replace the Fed. Another Central Bank ? What governs that bank? Who governs that bank? How are you going to insure the dollars stability, which is something everyone on the globe depends upon.

An finally how does any of this address the need to understand what these large private banking concerns are doing to ensure we do not repeat the last crisis?

[Jacque67 7,328]

What...no one wants to challenge my assertions?

I do not have a degree in econ and know nothing about the technical workings of banks, I should be easy fodder.

perhaps I need to adopt a condescending tone?

Splatooooon!!!

[OriZ 3,165]

To level set: the original context of this thread was whether the banks deemed to "big to fail" are at risk, which puts all of us (globally) at risk. The conversation shifted away from that discussion to what is deemed by some the root of the problem, Central Banking, specifically the special influence of the Federal Reserve of the United States. The original topic remains unaddressed by the Central Bank side show.

Lets break this down

The problems of pre-1914 banking in the US involved too many government restrictions, not too few.

So government restrictions on banks pre 1914 were at fault for recessions, depressions and panics? Are you bringing data on this?

Politicians may have believed that private banking was unstable, but had they looked to the Canadian model(at the time) as a guide, they could have concluded that market forces can give us a successful banking and monetary system just as it provides us with food, clothing and other necessities

And yet in 1935 Canada moved to a Central bank model with all shares owned by the Minister of finance. A move that has proven to be very successful (see recession of 2008 as one example)

Many libs won't listen because they don't really care about ever paying off the debt, and most conservatives won't listen because they are convinced we can solve the national debt problem if we just get a bunch of good conservatives into positions of power, but the truth is we have such a horrific debt problem because it was designed to be this way from the beginning.

Do we in fact have a horrific debt problem? I question that. I think we have a horrific deficit problem that requires congress to align spending with income, a political problem. Not sure what the Fed can do for that one except preach. The net effective tax revenues in the the US are far below those in western economies which is remarkable considering the % of International defense expenditure and our recent predilection for going to war.

If the FED didn't exist, we would have an economy with little to no inflation. The Federal reserve system is designed to be inflationary.

You and I must not have the same definition of inflation, because inflation goes back much further than the creation of the Fed, what is remarkable under the Fed is the lack of Deflationary periods

So what do I think should be done? The first step would be to repeal the 1913 law, and the subsequent amendments, that set up the current federal reserve.

You and I seriously disagree here. The first step (if we agree to abolish the Fed) is to create a plan for what system would take its place. What has not been put forward here is any reasonable plan to replace the Fed. Another Central Bank ? What governs that bank? Who governs that bank? How are you going to insure the dollars stability, which is something everyone on the globe depends upon.

An finally how does any of this address the need to understand what these large private banking concerns are doing to ensure we do not repeat the last crisis?

As I said in my previous post, when I mention ending the fed, I refer more to the current form and mandate, not necessarily to a limited form of a central bank that does not much more than issue notes and maybe a couple of other emergency measures. As I said when I talk about ending the fed I am talking about ending the FOMC. The reason this thread was kind of derailed off topic(although it hasn't really gone off topic because it IS part of the answer) was I was asked if more legislation against the big banks would be the answer and I don't think so. Only people that don't understand that the fed is the most evil group of bankers there is would suggest to use them as a mechanism to break up the big banks. It would be like breaking up little tiny cells of terrorism while not only leaving the top 10 terrorists unscathed, but actually expecting them to help with the dismantling of the other cells. So my point was you can't do anything about the big banks until you deal with the root of the problem, the snake's head.

Anyone who has even a remedial education on the fed knows that nearly all of America's economic woes can be directly tied to the fraudulent monetary system run by this private monopoly. Ron Paul has been right about this for 30 years...inherent in the fractional system is increased inflation and taxation which squeezes every worker and small businessman, resulting in a steadily decreasing standard of living for the vast majority of the population. Also inherent is the fed spending money(making loans) without congressional approval or oversight.

Another thing is the fed is actually a FOR PROFIT bank. And the profits are distributed between the shareholders which are the banks themselves. When I say end the fed I say end all that. I'm not saying we should go back to trading chickens and goats.

http://www.globalresearch.ca/who-owns-the-federal-reserve/10489

http://www.save-a-patriot.org/files/view/whofed.html

There could be "enough" independent banknote issuers, but not too many. The US currency became bewildering by 1860 when nearly 2,000 banks issued their own banknotes. Thus emerged the National Bank Act of 1863, which standardized the value of all banknotes by requiring all member banks to accept other member banks' banknotes at face value. Member banks' financial conditions were monitored, and capital adequacy ratios imposed. A record of all currency issuing banks was maintained and published. A distributed multi-issuer model should have "enough" banknote issuing entities(doesn't have to be a bank) to avoid any tendency towards monopoly, but not "too many" such that the system becomes dizzyingly complex while offering no significant additional advantage. A number between 10 and 100 entities, probably under an umbrella of oversight much like the National Bank System could work.

The Multiple Banknote issuer model is already in use today, in places like Hong Kong.

So I have already given some examples and my own ideas of what should be done instead of the current fed, but I guess that didn't suffice so here are a few more:

Friedman was in favor of abolishing the Federal Reserve System and replacing it with a mathematical model that would keep the quantity of money increasing at a steady rate, issued directly by the government (Treasury) and ending fractional reserve banking powers for the banks, which is why he supported our Monetary Reform Act. He said he actually would “like to abolish the Fed“, and pointed out that when he wrote about reforming the Fed it was simply his recommendations of how it should be run given that it exists. Though opposed to the existence of the Fed, Friedman argued that, given that it does exist, a steady expansion of the money supply was the only wise policy, and he warned against efforts by a treasury or central bank such as the Fed to do otherwise.

http://www.themoneymasters.com/the-money-masters/milton-friedman-end-the-fed/

Currency competition(like many different bitcoins), could be another option. You could end the fed's monopoly power by legalizing competing currencies.

Bill HR 4248 will essentially do three things: 1) repeal legal tender laws to remove the monopoly control of the Federal Reserve, 2) legalize private mints to issue coins to be controlled by anti-fraud and anti-counterfeit laws, and, 3) remove taxes from precious metal coins to ensure fair competition among new currencies.

1. Gold and Silver: First, by repealing legal tender laws the State will no longer be able to prosecute violators as domestic terrorists for using silver as an alternative currency. As a Constitutionalist, Paul supports gold and silver as a viable currency. Indeed, they have proven to be a safe store of wealth against fiat inflation. Gold and silver money have also been a timeless and border-less medium of exchange that would likely be generally accepted for interstate trade. If HR1098 were ever to pass, a commodity-based economy would likely become very popular as it will operate outside of the Federal Reserve’s debt-based, taxable money system.

2. Local Tender: Local currencies are already perfectly legal in the United States “as long as it does not look like dollars, as long as denominations are at least $1.00 value, and if it is regarded as taxable income.” In other words, they are essentially tied to U.S. dollars and must be taxed the same. Several communities have adopted alternative paper currencies to stimulate local trade. Many of these currencies have been set up in defiance of the debt-based money system and resemble a barter system. These local tender will obviously face challenges of interstate trade and are, depending on their structure, still somewhat at the mercy of a devaluing U.S. dollars. Under Paul’s competing currency act, these local currencies could now be considered “legal” tender, which could conceivably remove their peg to the dollar. However, it is unclear whether they will share the same tax-free benefits as gold and silver under Paul’s plan. Either way, they provide an important alternative exchange vehicle should the dollar became completely worthless.

3. Credit Unions and State Banks: Under the current fractional reserve system banks create over 90% of the money in the economy through loans. One way to utilize this power of the banks for the good of the local community is to support credit unions, or by creating state banks modeled after North Dakota. Credit unions may be structured differently depending on the institution; however, they all seem to loan only to depositors for local projects or businesses. They are also typically owned by the depositors themselves. The state bank of North Dakota works similarly in that it only makes in-state loans, fueled by the deposits of the state treasury, and profits go directly back into the state. Both of these entities offer an immediate alternative to the private banking cartel, and could conceivably print an alternative currency, if needed, that would likely be trusted by depositors.

4. Interest-Free Treasury Dollars: Interest-free money issued directly by the Treasury, reminiscent of Lincoln’s Greenback, would basically remove the for-profit middleman — the Federal Reserve. The concept of interest-free money in the U.S. started in Colonial times. Ben Franklin referred to it as “honest money” and wrote “In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to make the products pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one.” Naturally, the private banking cartel will deplore this idea, as it breaks their control over the government and the economy. John F. Kennedy was the last president to attempt this on June 4th, 1963 (Just months before his assassination); he signed Executive Order 11110, which gave him legal clearance to create interest and debt-free money directly from the Treasury. What made Kennedy’s plan even more secure is that his interest-free money was to be backed by silver bullion in the Treasury. This would seem to be the best national strategy so long as other local competing currencies are still allowed to exist. Otherwise we are just trading one monopoly for another.

5. Barter: Barter is the oldest form of trade. Simply put, barter is the voluntary exchange of goods and services for other goods and services without the need for currency. Because money is completely eliminated from the equation, barter naturally replaces money as the method of exchange in times of monetary crisis. Many local food cooperatives are starting to implement this type of quasi-underground economy based on credits, sometimes tied to currency for easy valuation. These systems encourage participants to produce something for the cooperative and are typically best used at the local level. Many new local currencies are replicated after barter systems, as money is only seen as a medium of exchange, not an instrument of debt or a store of wealth. Barter systems are quite easy to set up and manage these days utilizing the Internet.

http://www.activistpost.com/2010/12/monetary-revolution-begins-with.html

Yeah, I know, some people here are not big fans of the mises institute. I think, if you want to seriously look into ending the fed, this is a good read nontheless:

https://mises.org/library/how-end-fed-and-how-not

I think Ron Paul's recent book End the Fed begins that conversation in an excellent way. Richard Timberlake's wonderful

Monetary Policy in the United States: An Intellectual and Institutional History documents the US's experience with distributed banknote issuer system prior to the FED's introduction.

What...no one wants to challenge my assertions?

I do not have a degree in econ and know nothing about the technical workings of banks, I should be easy fodder.

perhaps I need to adopt a condescending tone?

So because I wasn't here all day(because I do try to have a life on the one day a week I do not work) that means no one wanted to challenge your assertions? Patience...

BTW, I have no degree in economics either. I think some of what they teach in economics/some economists these days are part of the problem and part of why we are where we are to start with. But that's for a whole nother discussion.

ou and I seriously disagree here. The first step (if we agree to abolish the Fed) is to create a plan for what system would take its place. What has not been put forward here is any reasonable plan to replace the Fed. Another Central Bank ? What governs that bank? Who governs that bank? How are you going to insure the dollars stability, which is something everyone on the globe depends upon.

An finally how does any of this address the need to understand what these large private banking concerns are doing to ensure we do not repeat the last crisis?

To insure dollar stability? Have you seen how far the dollar has been devalued since the fed's creation? What dollar stability are we talking about? Do you really think the fed cares about dollar stability? Do you really think the dollar is more stable due to the fed? If anything, the relative dollar stability in recent years is despite the FED and due to deflationary forces and despite the fed's futile attempts to fight these forces by pumping more and more money into the system.

How does it address the need to understand what these large private banking concerns are doing to ensure we do not repeat the last crisis...well, I've explained that in detail not only in this thread but also in my other thread as well as others. If you: a. encourage reckless activities by offering free money and b. encourage reckless activities by virtually guaranteeing a bailout every time they fail - you create a system where they just don't care. That is the first thing that has to end. And then we can talk. So for that to end we need to stop bailing them out, start holding them accountable, and end the fed and/or stop giving them free money to buy up risky assets with.

As far as the data you've requested:

Only two quasi-governmental banks were allowed to establish interstate branches in this period, the First United States Bank (1791-1811) and the Second United States Bank (1816-1836). The federal government owned one-fifth of the capital of each bank, causing political resentments which resulted in neither bank’s twenty-year charter being renewed.

When the charter of the Second United States Bank was not renewed, all banks were either chartered by the various states, or given permission to operate without a charter under the so- called “free banking” laws. No banks were allowed to branch across state lines, and some states prohibited branching altogether. This prevented a natural system of nationwide clearinghouses from developing to exchange banknotes and later, deposits. Thus, when these banknotes ended up at great distances from their point of issue, they often fell to a discount. Banknote reporters tried to keep the public informed about the value of these various notes, but some fraudulent issuers were able to take advantage of the lapse of time until this information was disseminated (Rolnick & Weber, p. 14).

Some banks, particularly in cities along the eastern seaboard, were able to maintain a stable Value of their notes. The best known was the Suffolk system, which operated in the Boston area. The Suffolk Bank was able to keep smaller regional banks from overissuing by means of a clearinghouse. Banks that refused to join the Suffolk system had their notes collected and immediately presented for payment in specie; those that joined were able to count on their notes being received at par.

One problem with the so-called “free banks” was the requirement that they hold an amount of state bonds equal to the banknotes they issued. These bonds often proved to be an illiquid investment for the banks, preventing them from holding the desired amount of specie to redeem their notes on demand. Since this requirement usually specified par rather than market value of the bonds, these securities in many cases were an inadequate protection for the note-holder (Rolnick & Weber, p. 16). Six states attempted to ease public fears about irredeemable banknotes by establishing a note guarantee system (FDIC, 1953, pp. 45-46)—which might not have been necessary had banks been free to branch and to hold the type of assets they preferred.

The National Bank System

Two of the methods used to finance the Civil War involved money manipulation. One was the issuance of a fiat currency (greenbacks) which was given legal tender status, and the second was the establishment of the National Banking System as a convenient place to sell low-interest bonds. The war led to the federalization of the U.S. currency because national banks were the only issuers of banknotes after Congress taxed the state banknotes out of existence. These new, uniform national banknotes were almost a government currency because they were printed by the Bureau of Engraving and the banks were forced to hold $100 of these 2 per cent government bonds for each $90 of notes they issued.

This system proved to be no improvement over pre-Civil War banking; it was just as prone to panics and to suspension of cash payments. The three main weaknesses of this new system, which were avoided in Canada, were: lack of branching, forced holding of a specific cash reserve, and a government bond-backed banknote. These governmentally imposed restrictions put the U.S. banking system in a strait jacket, making it vulnerable to shocks.

All national banks were forced to be unit banks except for those state banks that convened to a national charter were allowed to retain their intrastate branches. Nationwide branching would have been more stable and efficient, permitting safer bank portfolios through geographical and industrial asset diversification. Unit banks in farm states were at a special disadvantage during agricultural depressions, whereas Canadian banks could carry a non-per-forming loan to a farmer much more easily (Beckhart, p. 450). Branch banks can be opened more easily in new areas without the trouble of acquiring a new charter and establishing a separate board of directors (Dunbar 1904, pp. 195-197). In addition, branch banks can move reserves to where they are needed more quickly, and at lower cost, since they are held within the same institution and no other bank need profit on the transfer of these funds (Breckenridge, p. 377).

Secondly, national banks were forced to hold a fixed cash reserve against their deposit liabili ties, even though any reserve that must be held is no reserve at all, since it cannot be used. The law mandated that country banks hold two-fifths of their 15 per cent reserve in vault cash while the rest could be on deposit in a reserve city bank. These reserve city banks were required to hold half of their 25 per cent reserve in vault cash while the other half could be deposited in a central reserve city bank in New York, and after 1887, Chicago or St. Louis. The latter banks were forced to hold all their 25 per cent reserve in vault cash, which meant gold, greenbacks or other treasury currency. Only state-chartered banks could count national banknotes as part of their reserve.

Since banks could not use these required reserves, they had to carry an excess amount in order to operate; in a crisis, banks often had to suspend cash payments precipitating financial panics. The pyramiding of reserves in a unit bank system aggravated the problem. When faced with an increased demand for cash, each bank had to think of itself first and would pull its deposits from its correspondents. By contrast, each Canadian bank held its own reserve in whatever amount it felt adequate, with the one provision that government-issued Dominion notes had to consist of 40 per cent of whatever cash reserve the bank chose to hold (Breckenridge, p. 242). The pyramiding of reserves in the U.S. made American bank runs contagious; in Canada, a bank failure did not cause the public to distrust other banks.

The third restriction on national bank behavior that weakened the system was the requirement that each bank deposit with the Comptroller of the Currency $100 worth of 2 per cent government bonds for each $90 of banknotes they issued. (In 1900, banks were permitted to issue notes equal to the amount of bonds deposited.) Since these notes were printed by the Bureau of Engraving and were uniform in appearance, they were received and paid out by banks throughout the country. This system failed to test the ability of each bank to redeem its own notes as did the Canadian system with its distinctive banknotes (Dunbar 1917, p. 228). Yet underissuance rather than overissuance was the problem with national banknotes because of the government bond re striction.

Liquidity Crises

The value of these special bonds, rather than the demand for banknotes, became the constraint on banknote issuance. Some national banks never issued notes at all while others charged higher interest rates to borrowers who demanded loan proceeds in banknotes instead of deposits. The reduction of the Federal debt in the 1880s intensified the problem as evidenced by a decrease in banknotes outstanding from $325 million in 1880 to $123 million at the end of 1890 (Dunbar, 1917, p. 232). This underissuance of banknotes led to several liquidity crises which only U.S. banks suffered because they could not exchange one liability for another—banknotes for deposits- -as the public demanded. Instead, they had to pay out legal tender cash from their assets, thus depleting their reserves, which often led to suspension of cash payments.

By contrast, Canadian banks have not suspended cash payments since the late 1830s. All banks were allowed to issue their own distinctive banknotes without holding a legally mandated asset to back them. These notes were subjected to the daily market test of public acceptance as each bank sought to get its own notes into circulation while simultaneously driving home rival notes to their respective is-suers through note exchanges. Furthermore, these banknotes were an inexpensive till money because they were not a liability until issued (Beckhart, p. 377). This reduced the cost of establishing branches in newly developed areas.

Canadian banknotes also had excellent elasticity, expanding and contracting as the demand for them changed. This was especially evident during the autumn when crops were moving to market and the demand for banknotes sometimes increased as much as 42 per cent of the yearly minimum (Curtis, p. 20). During the Panic of 1907, some Canadian banknotes even circulated in parts of the U.S. after American banks suspended cash payments (Johnson, p. 78).

The only government restriction on the issuance of Canadian banknotes was an unnecessary one that proved to be harmful in the early 20th century. No bank was permitted to issue notes in excess of its paid-in capital, which excluded the surplus account. When passed in 1871, no bank had approached that limit, but by 1908, some had. But instead of removing this unnecessary restriction, Parliament passed a special law that year permitting banks to issue notes to an amount 15 per cent over their combined capital and surplus accounts during the crop moving season if banks paid a 5 per cent tax on this excess issue. Banks obviously disliked this tax so in 1913, Parliament passed another law which allowed banks to avoid the tax if their excess issue were fully banked by deposit of gold in the newly-created Central Gold Reserve in Montreal (Neufeld, p. 108). Banks in Canada had only about a year’s experience operating under these new provisions before World War I broke out which saw the Canadian government undertake inflationary wartime measures, such as suspending the gold standard and permitting banks to borrow fiat base money from the Minister of Finance.

Emergency Currency: The Illegal Clearinghouse Loan Certificate

In times of crisis when U.S. national banks were forced to suspend cash payments, these banks cooperated through their respective clearinghouses to issue a free market money which, though illegal, worked quite well in preventing the contagious runs that were to implore the whole system in the early 1930s. The clearinghouse allowed unit banks to put up a united front in times of panic by marshaling the resources of all the members, thereby stretching the scarce supply of currency. The clearinghouse would authorize the issuance of loan certificates which banks with deficits could use instead of regular currency to settle their balances after these banks pledged acceptable securities as collateral. Banks holding surpluses accepted these loan certificates as payment to earn the 6 per cent interest that was paid on them (Timberlake, pp. 4-6). If a deficit bank failed and the collateral was insufficient to cover the loan certificates, the members of the clearinghouse had to share the loss.

During the Panics of 1893 and 1907, clear-inghouses used small denomination certificates for hand-to-hand currency in addition to large denominations to settle their balances (Noyes, pp. 20- 22). The public obviously preferred legal currency to these small certificates as evidenced by the fact that the makeshift currency usually fell to a discount until suspension of cash payments ended (Andrew, pp. 507-509). Yet these free market arrangements mitigated each panic by preventing the fractional reserve collapse that was to occur after the Federal Reserve was in operation. On the other hand, it is possible that these crises would not have occurred at all if U.S. banks had been allowed to issue banknotes without restrictions, to branch where they wanted, and not made to hold a useless cash reserve.

Emergency Currency: The Legal Aldrich-Vreeland Banknote

In the aftermath of the Panic of 1907, Congress passed the Aldrich-Vreeland Act of 1908 which authorized national banks to issue a legal emergency currency until a permanent solution could be found. This law, which was to expire on July 1, 1914, attempted to overcome two of the three shortcomings of the national bank system: the lack of branching and the rigid restrictions on issuance of banknotes. Any ten or more national banks with an aggregate capital of at least $5 million could form a national currency association to issue notes backed by commercial paper or other securities, rather than just the 2 per cent government bonds to which banks had been restricted. These new banknotes, for which all banks in the association would be liable, could not exceed 75 per cent of the market value of the securities backing them and, in addition, could not be issued until the banks in the association had regular government bond-backed banknotes out standing equal to 40 per cent of their capital stock. Congress further imposed a 5 per cent tax on this emergency currency for the first month of its circulation and this tax was to increase by I percentage point a month until it reached a maximum of i0 per cent (Comptroller 1908, pp. 73, 75).

Even though 21 national currency associations were formed during the next 6 years, no emergency currency was issued, either because the tax was considered to be excessive, or no occasion warranted it. Congress passed the Federal Reserve Act on December 23, 1913, but the new System did not begin operating until November 16, 19!4. However, the Federal Reserve Act extended the provisions of the Aldrich-Vreeland Act for one year, until July 1, 1915. Ironically, had it not been extended, the Act would have expired before the need to use it arose. Congress also reduced the tax on the emergency currency to 3 per cent for the first 3 months it was outstanding, after which the tax was to rise by half a point each month until a maximum of 6 per cent was reached (Comptroller 1914, p. 12-13).

The occasion for using the new currency was the crisis following the outbreak of World War I in August 1914. Foreign holders of American securities tried to liquidate them for gold, and depositors tried to convert their deposits into currency, both of which put extreme pressure on bank reserves (Sprague, p. 517). Before banks could issue the new currency on demand, however, Congress had to repeal the restriction that banks could only issue it if they had bond- backed banknotes outstanding equal to 40 per cent of their capital. Congress responded quickly, even increasing the aggregate amount of notes that could be issued (Wall Street Journal, August 5, 1914, p. 6).

For the first time national banks could issue banknotes for deposits on public demand, thereby preventing suspension of cash payments which were so characteristic of past American crises. Even though only 1,363 of the 2,197 banks in the 45 currency associations in existence at that time actually issued the emergency currency, it was the immediate response to public demand that prevented the panic (Comptroller 1915, pp. 92, 99). Only $386.4 million was taken out during the emergency that lasted into the spring of 1915, but $368.6 million, or 95 per cent of the total, was issued by the peak period in October (Wall Street Journal, November 3, 1914, p. 1). By the first week of January, 60 per cent had been retired; the remainder was retired by the end of June, except for $200,000 in a failed bank (Comptroller 1915, p. 101).

Less than a fourth of the legal maximum was ever issued, with banks in New York City taking out 37.5 per cent of the total; these banks were the first to issue the currency and the first to retire any and all of it (Comptroller 1915, pp. 100-101). This Act allowed national banks to act as Canadian banks would under stress, issuing banknotes as demanded and saving their gold and treasury currency for use as a reserve. State chartered banks could use the emergency currency as part of their reserves, but as often happens, once they realized this currency was readily available, they, along with the general public, stopped demanding it. Much of the emergency currency sent to the interior was later returned to New York in its original wrappings (Wall Street Journal, November 14, 1914, p. 8).

Conclusion

From hindsight we know that both legal and illegal emergency currency outperformed the Federal Reserve during the credit implosion of the early 1930s. Banks can respond to market forces if they are allowed to issue banknotes, which are an “inside money” just as are deposits, but they cannot issue “outside” Federal Reserve Notes. When the public found out that currency was not available, they demanded it all the more, precipitating the fractional reserve collapse during the depression.

[OriZ 3,165]

Note: I am personally opposed to Friedman's suggestion - but I am just showing there are options.

[OriZ 3,165]

Splatooooon!!!

I only treat people however they deserve to be treated. Treat me with respect and you'll get respect in return. Have an attitude and I'll give you the worst attitude you've ever seen. Not directed at you just in general.

[Jacque67 7,328]

I only treat people however they deserve to be treated. Treat me with respect and you'll get respect in return. Have an attitude and I'll give you the worst attitude you've ever seen. Not directed at you just in general.

Oh really? Big talk....

Can see new avatar now do plus 1 for that. Will read your other posts after work..

Ciao.

Edited April 18, 2016 by Jacque67

[OriZ 3,165]

Oh really? Big talk....

Can see new avatar now do plus 1 for that. Will read your other posts after work..

Ciao.

Really.

The avatar thing only took two weeks.

Edited April 18, 2016 by OriZ

[Jacque67 7,328]

Really.

The avatar thing only took two weeks.

Yep. Did you do something different to it?

Btw don't quote me for the next couple of hours as I'm heading for a meeting...

Jams up my emails

Ya don't want me to break out my gat, now do ya????