Mr. President,
I am writing this letter to tell you respectfully that I disagree with your administration’s fiscal policies. I think we have had far too much stimulus, bailout, and “quantitative easing.” These policies have held the interest rates from the Fed at near zero for 32 months. Still…the unemployment rate is above 9%. This indicates a failure of Keynesian economics to produce the results it aims to produce. WE NEED A DIFFERENT PLAN!! The Federal Reserve is trying to get money for the government by selling 10-year Treasury bonds at 1.88% interest—who in his right mind is going to buy such a low yield bond? There is no profit in buying government securities.
Lately, Congressman Barney Frank has proposed stripping the Federal Reserve Governors of all membership in the Open Market Committee, leaving all the votes on that committee in the hands of political appointees. They only had four votes out of twelve, anyway; and if they are eliminated, I fear that all voice for tighter money on that committee will disappear.
Monetary policy should not be left up to politicians. I believe that private sector should have more, not less, say so on the Open Market Committee.
Thursday, September 22, 2011
Wednesday, September 21, 2011
What Is the Federal Reserve Bank; and How Does It Work?
Today’s newspapers are full of references to economic news; and references to the Federal Reserve Bank are replete in those articles. But…many of us do not know what the Federal Reserve is and how it works. Here is a short primer:
The Federal Reserve is a bank that is established by Congress. It consists of the central bank of the United States. It includes a Board of Governors, 12 District Banks, 25 Branch Banks, and assorted committees. The most important of these committees is the Federal Open Market Committee, which directs monetary policy. The FOMC is made up of 12 voting members; eight of these members are political appointees of the President, and 4 are regional bank presidents.
The function of the Federal Reserve is to control monetary policy, which, in other words, is the supply of money for the country. The “Fed,” as it is called, puts money into our economy when recessions occur; and it takes money out of the economy when inflation is the problem. By doing these manipulations, the Fed is supposed to control overall prices and unemployment.
The Fed uses 3 mechanisms to control prices, inflation, and recession: The first is “open market operations,” which is the Fed’s option to buy or sell government bonds—by doing so, the Fed can either add to or subtract from the money supply in the country. The second is to manipulate the “discount rate,” which is the interest rate the Fed uses to loan money to other banks for them to lend the money to borrowers. The third method is to manipulate the “reserve requirements” of commercial banks, i.e., the amount of money the commercial banks are required to keep on hand to secure their deposits. By lowering or raising the reserve requirements the Fed can add to or subtract from the supply of money circulating in the economy.
If my readers are interested in learning more about economic principles and terms, I would suggest that they look at http://glossary.econguru.com/economic-term/reserve+requirements
The Federal Reserve is a bank that is established by Congress. It consists of the central bank of the United States. It includes a Board of Governors, 12 District Banks, 25 Branch Banks, and assorted committees. The most important of these committees is the Federal Open Market Committee, which directs monetary policy. The FOMC is made up of 12 voting members; eight of these members are political appointees of the President, and 4 are regional bank presidents.
The function of the Federal Reserve is to control monetary policy, which, in other words, is the supply of money for the country. The “Fed,” as it is called, puts money into our economy when recessions occur; and it takes money out of the economy when inflation is the problem. By doing these manipulations, the Fed is supposed to control overall prices and unemployment.
The Fed uses 3 mechanisms to control prices, inflation, and recession: The first is “open market operations,” which is the Fed’s option to buy or sell government bonds—by doing so, the Fed can either add to or subtract from the money supply in the country. The second is to manipulate the “discount rate,” which is the interest rate the Fed uses to loan money to other banks for them to lend the money to borrowers. The third method is to manipulate the “reserve requirements” of commercial banks, i.e., the amount of money the commercial banks are required to keep on hand to secure their deposits. By lowering or raising the reserve requirements the Fed can add to or subtract from the supply of money circulating in the economy.
If my readers are interested in learning more about economic principles and terms, I would suggest that they look at http://glossary.econguru.com/economic-term/reserve+requirements
Sunday, September 18, 2011
What’s Changed in America Since the Revolution?
Of course, many things have changed in America—technical things come instantly to mind. But the things that come to my mind as most important, are the things having to do with the basic attitudes, values, and abilities of our people. As an example, many have commented on the difference between the beliefs, purposes, and values between the founding fathers and the present day politicians who run our United States.
Many books are in print, which would seek to tell us that the founders of America were self-seeking bigots who had no altruistic purposes in mind when they wrote the Declaration of Independence and our Constitution. The books propounding these views began to appear in 1896 in an essay called “The Political Depravity of the Founding Fathers,” by John Bach McMaster. These books and writings continued for more than a century and seriously called into question even the things we take for granted about the founders’ desire to seek the democratic will of the people in establishing a representative form of government. In particular, many writers have claimed that the founders were not Christian to any great extent. They are said to have established a government completely separate from Christian faith and practice.
On the other hand, writings are in print, which tend to paint the founding fathers as near perfect, demigods with only the good of the country at heart. The truth is somewhere between these two extremes.
Gordon Wood, a professor of history at Brown University has written a book entitled "Revolutionary Characters, What Made the Founders Different." In that book, he points out that the founding fathers of our country were strongly influenced by the culture and the intellectual forces of their day. They were sons of the enlightenment. They sought to establish a country where freedom would prevail and where civil society would rein without hostile and harmful influences to destroy the hopes and aspirations of men and women of good intention. They appealed to reason as a foundational building block. They were always aware of a higher law than the "natural law" or "common law" of their day,i.e., the implicit and explicit laws of the Bible. . They strove to epitomize good manners and good faith among their co-workers in this project of establishing a new nation. For the most part, they would act in a respectable and honorable way toward those around them; and they always tried to leave the impression of being gentlemen in their actions.
The American founders knew well that the polite and sophisticated metropolitan center of the empire was steeped in luxury and corruption. England had sprawling, poverty-ridden cities, over refined manners, gross inequalities of rank, complex divisions of labor, and widespread manufacturing of luxuries, all symptoms of over-advanced social development and social decay. It was said of this society by Samuel Stanhope of Princeton University, “that human society can advance only to a certain point before it becomes corrupted, and begins to decline.” To many, England in the 1760’s and 1770’s seemed to be on the verge of dissolution. The North American colonists who came in direct contact with London were shocked at the notorious ways in which hundreds of thousands of pounds were being spent to buy elections. This “most unbounded licentiousness and utter disregard of virtue” could only end, as it had always had in history, in the destruction of the British Empire. The American founding fathers wanted with all their heart and energy to avoid such a society.
As a result of this motivation, our founders set up a system of government which was, at the time, the beginning of egalitarian democracy. The voices of ordinary white people began to be heard as never before in history. The founders, were, themselves, an elite aristocracy imbued with high ideals and aspirations for the good of the country. What they could not have suspected, however, was that when the voices of the common people were considered, many of their high-sounding ideals would be trampled underfoot; and political preferences, partisan politics, and the influence of social and economic pressure groups would overwhelm much of what they were so valiantly trying to achieve.
We are seeing this effect, today; and the high ideals of our founders will probably never, again, be visible in our American society. It has been posited by knowledgeable observers that as soon as the voting majority see that they can vote themselves significant benefits, they will do so; and social freedom and entrepreneurship will disappear from our society. I fear that those days are upon us.
It is my personal opinion that much of the gain in societal management which was so very salutary to our country in the beginning will never, again, be seen in its pure form. I believe that one reason for this is that the effect of Christian religion will not likely be infused into our behavior and policies as it was in the lives and actions of our founders. Such statements as the one uttered by John Adams, our second President, are not likely in our present day political climate. “The general principles on which the fathers achieved independence were the general principles of Christianity. I will avow that I then believed, and now believe, that those general principles of Christianity are as eternal and immutable as the existence and attributes of God.”
Many books are in print, which would seek to tell us that the founders of America were self-seeking bigots who had no altruistic purposes in mind when they wrote the Declaration of Independence and our Constitution. The books propounding these views began to appear in 1896 in an essay called “The Political Depravity of the Founding Fathers,” by John Bach McMaster. These books and writings continued for more than a century and seriously called into question even the things we take for granted about the founders’ desire to seek the democratic will of the people in establishing a representative form of government. In particular, many writers have claimed that the founders were not Christian to any great extent. They are said to have established a government completely separate from Christian faith and practice.
On the other hand, writings are in print, which tend to paint the founding fathers as near perfect, demigods with only the good of the country at heart. The truth is somewhere between these two extremes.
Gordon Wood, a professor of history at Brown University has written a book entitled "Revolutionary Characters, What Made the Founders Different." In that book, he points out that the founding fathers of our country were strongly influenced by the culture and the intellectual forces of their day. They were sons of the enlightenment. They sought to establish a country where freedom would prevail and where civil society would rein without hostile and harmful influences to destroy the hopes and aspirations of men and women of good intention. They appealed to reason as a foundational building block. They were always aware of a higher law than the "natural law" or "common law" of their day,i.e., the implicit and explicit laws of the Bible. . They strove to epitomize good manners and good faith among their co-workers in this project of establishing a new nation. For the most part, they would act in a respectable and honorable way toward those around them; and they always tried to leave the impression of being gentlemen in their actions.
The American founders knew well that the polite and sophisticated metropolitan center of the empire was steeped in luxury and corruption. England had sprawling, poverty-ridden cities, over refined manners, gross inequalities of rank, complex divisions of labor, and widespread manufacturing of luxuries, all symptoms of over-advanced social development and social decay. It was said of this society by Samuel Stanhope of Princeton University, “that human society can advance only to a certain point before it becomes corrupted, and begins to decline.” To many, England in the 1760’s and 1770’s seemed to be on the verge of dissolution. The North American colonists who came in direct contact with London were shocked at the notorious ways in which hundreds of thousands of pounds were being spent to buy elections. This “most unbounded licentiousness and utter disregard of virtue” could only end, as it had always had in history, in the destruction of the British Empire. The American founding fathers wanted with all their heart and energy to avoid such a society.
As a result of this motivation, our founders set up a system of government which was, at the time, the beginning of egalitarian democracy. The voices of ordinary white people began to be heard as never before in history. The founders, were, themselves, an elite aristocracy imbued with high ideals and aspirations for the good of the country. What they could not have suspected, however, was that when the voices of the common people were considered, many of their high-sounding ideals would be trampled underfoot; and political preferences, partisan politics, and the influence of social and economic pressure groups would overwhelm much of what they were so valiantly trying to achieve.
We are seeing this effect, today; and the high ideals of our founders will probably never, again, be visible in our American society. It has been posited by knowledgeable observers that as soon as the voting majority see that they can vote themselves significant benefits, they will do so; and social freedom and entrepreneurship will disappear from our society. I fear that those days are upon us.
It is my personal opinion that much of the gain in societal management which was so very salutary to our country in the beginning will never, again, be seen in its pure form. I believe that one reason for this is that the effect of Christian religion will not likely be infused into our behavior and policies as it was in the lives and actions of our founders. Such statements as the one uttered by John Adams, our second President, are not likely in our present day political climate. “The general principles on which the fathers achieved independence were the general principles of Christianity. I will avow that I then believed, and now believe, that those general principles of Christianity are as eternal and immutable as the existence and attributes of God.”
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