should the fedaral reserve be reformed or abolished?

Question

Should the price of money be based upon something like the strength of our economy.

Answer 1

The Fed only controls M1 & M2. M3 is what PRIVATE businesses generate.

The tools the Fed uses is:
Reserve Requirments
Discounting & Discount rate
Open Market Operations

The principal is based off a "Capitalistic" market based off Supply & Demand. This means that it is based off the strenght of our economy.

Problem is when we're working hand in hand with governments who do not use "Capitalistic" markets and give financial reports that undervalue their currency. China is has been undervaluating her currency for the last 20 years. This is luring businesses to China. This is great for China ... but bad for the USA. Another advantage China has is a government that doesn't care about "Labor" or "Enviromental" issues. So, again, corporations are lured to China with their undervalued currency, low labor, and little to no enviromental contrataints.

IMO reformation is needed in what we "Import" into the USA. These products and services should meet or exceed our expectations in labor, enviroment, and other laws we hold deer. Should countries that fail to meet or exceed these should be prohibited from selling their goods and services to the USA.

Answer 2

What exactly are you referring to when you say "price of money"? The "price of money" can be measured against domestically available goods and services (in which case it's called inflation), against time when borrowing and lending (in which case it's called interest rate), or against foreign currencies (that would be the exchange rate).

If you take "price of money" to mean interest rate, the Fed does a fairly decent job of adjusting it to reflect the strength of the U.S. economy. If "price of money" is inflation, the Fed is far from the only player in this game; oil prices and collective bargaining agreements have a large impact, too. If "price of money" is the exchange rate, it is a proven fact that fiddling with it creates ample opportunities for moral hazard in the short-run and does more harm than good in the long-run.

So all in all, the Fed actually works. If you want to reform something that really needs to be reformed, take a stab at healthcare financing...

Answer 3

The argument has been made (and I tend to agree, because it helps avoid liquidity pockets like 1987 and today) that keeping the money supply steady would reduce volatility in our economy.

That said, you remove the power for the Fed to do anything about inflation caused by outside factors, like the oil shocks in the 1970s.

Answer 4

Ron Paul wants to abolish the federal reserve and go back to the U. S. Treasury departments handling of American money.
If you don't think that would work, please allow me to re-write something from a 1998, Presidential hopeful of that time period.

"Under economic nationalism { U.S. Treasury in charge of money} there was no income tax in the USA, except during the Civil war & reconstruction. Tariffs produced 50% to 90% of federal revenue.

Did America prosper?

From 1865 to 1913 U.S. growth averaged 4% per year. We began the era producing 1/2 of Britians production, but ended the era with 'twice' Britians production....With no income tax and using Gold & Silver as money." [finish quote]

Gold & Silver always has been and always will be a better and more stable, money than un-backed paper money........

......Why are we having such wide swings in stock market pricing recently?

Answer:
The dollar is currently percieved by many investors as "Un-stable"!
Thank you.
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