Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Op-Ed: A Debt-Free Federal Government?

By

Artificially low interest rates could revolutionize economy.

PrintPRINT
Editor's Note: Eric Von Baranov writes and speaks extensively about economic, geopolitical, technological and social trends, and now writes about the coming renaissance in America.

Having been an early supporter of "Uncle" Ben Bernanke, I'm as shocked as anyone over this current, boneheaded move. Add 2 disturbing trends -- the fall off of the US dollar and the rise in gold -- and the good the Federal Reserve was doing is now being reversed.

Bailing out the banks to keep liquidity in the system, and making sure the currency remains viable, is the duty of the Fed. It can't be held responsible for Congress's overspending, or for the Bush administration's very expensive war. But aside from the need to keep liquidity in the system, the Fed needs to make the banking system practicable.

Henry Paulson certainly strong-armed the major banks into participating in the bailout. Following this line of reasoning, one could assume that forcing smaller banks to fail -- while also owning shares in bigger banks -- would give the government de facto control. No matter - the outcome will be tighter control of and greater disclosure for all banks

However, it's not necessarily the banks that brought on the current crisis. The greater liability is from the hedge fund secondary security markets that created a compounding liquidity and forced asset sales problems.

The question is: What happens next? I'm torn on this one. The perennial bears will growl that they saw this crisis coming since 1968, or 1971, or... Well, you get the picture. But I don't buy that the system is flawed any more than I would suggest people not invest just because one individual stole $50 billion via a bogus hedge fund.

One has to look at the driving forces, and ask why the Fed is acting inappropriately. Maybe the problems that the Fed faces are bigger than anyone can appreciate. By going to a zero-interest rate, it's attempting a last-ditch effort to float banks in an environment where there's not enough liquidity to bail them all out. When the crisis hit, Alan Greenspan criticized Paulson's request for $700 billion and said it should have been $7 trillion.

I know there are some who love to bash Greenspan. But Greenspan did a good job managing the Fed. He left Bernanke with a loaded gun after taking the banking system through the dot-com crash. He told Congress and the administration to stop spending - and became the target of adverse publicity as a result.
< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE