The History of the Federal Reserve's Rate Control (The Real Facts! This is not a Conspiracy!)

Credit to the author: projectavalon.net...

The following graphs are from: greshams-law.com...




In the 1920's the Fed lowered rates to create an artificial level of prosperity. From 1921 to 1929 the Fed increased the money supply to 62%. And it inverted the Treasury bond yield, that means the Fed set and encouraged short term rates over long term bond lending. This is the same policy they did right before the 2008 crash. The Fed also added to the stock market a new financial practice called the margin loan. The clause associated with the loan stated that the loans can be called in at any time and had to be paid within 24 hours of that time. Also many other new but very risky financial practices were created at the time. Then in 1929 Rockefeller, Benard Burack, and other insiders pulled out of the market and called in all of their loans. Next, 16,000 banks collapsed and they took control of them all. Afterwards the Fed set money supply to a record low, and it led to the Great Depression.

Ben Barnanke admitted that the Fed had caused the Great Depression:

"I would like to say to Milton Friedman and Anna Schwartz: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."-Ben Bernanke

en.wikiquote.org...

I will not post the graph of the WW2 era, as its apparent that WW2 provided full employment and made economic recovery as mobilization occurred. This ended the Great Depression, and America experienced a prosperous era of dominating global trade (1950's and 60's). Europe at the time was in ruins and had to rebuild according to the Marshall Plan, in which the USA gave fiscal aid to help Europe in re-construction. So the USA went to have an economic hegemony for 2 decades.



The 70's experienced a recession due to the Oil Crisis. The economy recovered in the 1980's, but not because of Reagan's supply side economics. Paul Volcker, chairmen of the Federal Reserve, increased interest rates to control inflation. He brought inflation from a peak of 20% in 1981, and lowered it to 3.2% in 2 years. Reaganomics did deregulate the economy that resulted in the Savings and Loans Crisis. Reagan then had to bail out the financial sector. Reagan used Volcker's forced artificial prosperity to his advantage and won a second term.

But deregulation didn't stop there. It did cause growth in the economy, including the dot com boom (but remember Volcker saved the US from inflation, not Reagan). Continued deregulation repealed the Glass Steagall Act in 1999. Actually, GS worked well in regulating the economy since 1933, for a period of 66 years. Recessions weren't that severe in that length of time, except the Oil Crisis. But Wall street lobbyists convinced the government that GS was no longer practical. GS prevented the merging of banks into bigger banks. Citigroup had merged earlier that year and it was considered illegal by the GS Act. But it was repealed and Citigroup was allowed to exist in the market.



The 2000's experienced artificial prosperity in similarity of the Roaring 20's.

The 2008 mortgage crisis was the result of monetary and fiscal policy.

During the last decade the Fed pursued inflationary policies and set rates to an all time low at 1%. This created an economic and housing boom. The investment financial sector flourished (mortgage backed securities, derivatives, credit default swaps) and credit was easy. Then the Fed hiked its rate to 5.25% in 2006, inverting the Treasury bond yield. "Inverting the bond yield lowers short term lending rates, but yields profit lower than the long run investment yields." (Inverting the treasury bond yield is a policy that was also enacted before the 1929 downfall.) Now lending was much less profitable, housing prices fell, foreclosures occurred, and the market crashed.

The government helped create the housing bubble as well. They created legislation that made lenders to work with low income individuals. Lenders were threatened to not discriminate against disadvantaged borrowers. Government also sponsored Fannie Mae and Freddy Mac and the Federal Housing Administration to "lower the lending standards". At this time Congressmen Chris Dodd and Barney Frank lobbied for less regulation on Fannie Mae and Freddy Mac.

This created artificial prosperity and artificially high housing prices. When reality hit, the bubble burst. Actually, the Fed pulled the vital card (raising the rate to 5.25%) to cause the whole house of cards to fall.

The Repeal of Glass Steagall allowed banks to merge into bigger banks. And as the mortgage crisis came along, the government bailouts were "necessary" because banks were "too big to fail". The GS Act repeal created corporate welfare. The resulting bailouts made big checks to the heads of these firms all from the expense of taxpayer money. The big banks then bought out the small banks that failed, and became much bigger than before. Their game is all about consolidating the oligopoly.



The Wall Street lobbyists spent immense amounts of money to repeal GS and to push for Reaganomics and deregulation. They also lobbied against the Dodd Frank Bill, the Wall Street Reform and Consumer Protection Act. Dodd Frank ended up to be some crappy, watered down legislation. Since it has been enacted in 2010, they have lobbied as much as they could to cut off the new Dodd Frank regulation. They engage in strict deregulation-"Reagan" type of lobbyism. They will never give up on eliminating regulation.

Government intervention, the Federal Reserve, and deregulation all forced this downturn to happen. To me, it seems like they designed and intended this to happen. And they made sure that they wouldn't suffer that terribly when the market fell, by repealing Glass Steagall and enacting "too big to fail" corporate welfare policy.


The above image is from: blog.mint.com...



As the big picture became clearer to me, the LIBOR scandal has come into the media. LIBOR is the greatest fraud in financial history. But the exposition of this crime was probably planned to upheld an ex-Goldman Sachs banker into the Bank of England. Now they control the important Western banks, the Fed, the European Central Bank, the Bank of International Settlements, and now the Bank of England. (Know that the top financial institutions are led by ex-CEO's of big banks only to manipulate rates to ensure the 1%'s profits in the financial sector).

This is the Next Excerpt, Credit to the Author: projectavalon.net...

LIBOR is the inter bank lending rate on the loans that banks lend to each other. It is exactly the same as the Fed Fund and Discount rates of the Federal Reserve. LIBOR (and EURIBOR) also set rates on mortgages, credit, and any type of loan. The LIBOR and EURIBOR rates were lowered so printed money was borrowed cheaply and in turn was lent to central banks and governments. They collected the difference in interest and netted billions of manipulated profits. The groups prosecuting LIBOR are pension plan organizers, insurance firms, and governments that have and would have lost lots of money based on the interest rates manipulated by LIBOR. The lawsuits can be the final wake up call to reform and bring justice to the Western financial sector that has been the place of the most corrupted enterprises in world history.

There are number of issues I do not agree on with Austrian economists. I believe that Keynesianism cam be used effectively with some elements of the "free market" (austrianism).

I do not agree on:

hyperinflation in the near future

the reliability of the gold standard

the Dollar Bubble

Reaganomics

(Friedman was a top advisor of Ronald Reagan)



The Audit the Fed Bill is quite unpractical to me. The Fed has been the force of stability (and instability) throughout history. Auditing the Fed can be very detrimental to the economy. The setting of rates among banks is absolutely necessary. Friedman agreed with instituting a non-political central bank. The people that run these institutions are the problem.

If we did audit the Fed, another system has to be set already with a foundation. My proposition is a system based on alternative energy. But I don't think this will ever happen, because free energy suppression has been successful. Depopulation will correspond with a Peak in Scarce Resources that will be the end of the age. I have posted the graph below before, but its here to reiterate my point:
media.smithsonianmag.com...

I understand the Federal Reserve has manipulated rates to cause contractions and expansions in the business cycle. This graph demonstrates the business cycles since 1900. The nation experienced panics in the years in 1819, 1837, 1857, 1873, 1884, 1893, 1907, and 1930–1933. When FDR passed the New Deal, and the economy recovered during World War 2, the new regulations stabilized the business cycles and recessions were much less severe than the Panics before FDR. Conspiracy theorists have flawed economic beliefs, that is called Austrian Economics. I agree with Friedman on many issues, but Keynesianism has worked great as well. The era of the free market experienced severe Panics, and the era of Keynesianism was stable and much less severe. The Keynesian recessions weren't as steep and severe as the Panic curves. The curves of the Keynesian recessions were regulated, smaller, smoother, and stable. Keynesianism set a safety net that the economy, firms, the government, and people can fall back on when we experienced hard times. Look at the facts, tin foilers, do not follow Ron Paul blindly. I look at all sides of the debate, and I believe in some elements of the free market and some of Keynes. I look at what works, and what cannot.

For the record mixing a free market ideology with a Keynesian ideology is called crony capitalism.

The New Deal did not end the Great Depression during WWII; the war during WWII ended the Great Depression! You have got to be joking. Also the New Deal extended the Great Depression because anyone who paid attention in a graduate level econ course can tell you when government spends more than it receives in tax revenue – savings and investments are negatively impacted.

I highly suggest you read some Rothbard instead of the widely accepted economic propaganda garbage you undoubtedly have based your opinion on. Also you have no grounds to say anyone’s economic views are flawed after your miserable attempt to do whatever this post was.

Originally posted by ConspiracyBuff
For the record mixing a free market ideology with a Keynesian ideology is called crony capitalism.

The New Deal did not end the Great Depression during WWII; the war during WWII ended the Great Depression! You have got to be joking. Also the New Deal extended the Great Depression because anyone who paid attention in a graduate level econ course can tell you when government spends more than it receives in tax revenue – savings and investments are negatively impacted.

I highly suggest you read some Rothbard instead of the widely accepted economic propaganda garbage you undoubtedly have based your opinion on. Also you have no grounds to say anyone’s economic views are flawed after your miserable attempt to do whatever this post was.

edit on 4-8-2012 by ConspiracyBuff because: face!

I did say in the first post that WW2 recovered the economy. I said the New Deal set up regulations that made business cycles more stable. I said WW2 saved the economy, not FDR.

So if you went to Graduate School, why are you an Austrian economist? The Federal Reserve is not that bad, the gold standard is unreliable, hyperinflation will not occur in the near future, and the Dollar Bubble doesn't exist. Why do you believe in conspiracy economics?

Monetary reform is the only way we will achieve world peace, "free" energy, and a planet I would be proud to pass on to my kin.

Originally posted by theshepherd2
Monetary reform is the only way we will achieve world peace, "free" energy, and a planet I would be proud to pass on to my kin.

Only if alternative energy can flourish in isolated areas away from corporate surveillance.

reply to post by Ruffian


You did say the New Deal ended the Great Depression in your conclusion paragraph. If this was a paper I would give you a B-.

I never said I was of the Austrian School of thought; you make that assumption because you do not have the knowledge base to realize there are more than a handful of economic theories.

You do realize Modern Money Mechanics, which is what the Fed bases is monetary policy off is loosely based on the Austrian School of thought right?

I see one component missing and that is the real inflation rate versus what the government says inflation is..

for example in the last 30 years wages have been gutted by inflation and real buying power has been stripped fro the average working person.

then on top of that the governments phony inflation numbers trickled down throughout the economy.... COLA adjustments for retirees should be about double over the last 30 years while standards to qualify for government programs like SNAP or food stamps have not changed since 1884 with a $2000 cap on assets. Does anyone think that $2000 has the same buying power in 2012 as it did in 1984? I surly hope not...

though we have not had hyperinflation I see that we have not had a real inflation standard applied to government programs.

I like John Williams of www.shadowstats.com who uses the old formula to calculate things like unemployment and inflation. From the charts I have seen on his website and other sites that published his inflation charts that the current BLS calculations of inflation are running about half or less than real or actual inflation.

Originally posted by ConspiracyBuff
reply to post by Ruffian

 

You did say the New Deal ended the Great Depression in your conclusion paragraph. If this was a paper I would give you a B-.

I never said I was of the Austrian School of thought; you make that assumption because you do not have the knowledge base to realize there are more than a handful of economic theories.

You do realize Modern Money Mechanics, which is what the Fed bases is monetary policy off is loosely based on the Austrian School of thought right?

Then what do you believe?

If the Fed isn't detrimental then I can't understand why conspiracy theorists would hate it. If it is loosely based off of Austrian thought, Ron Paul shouldn't lobby against it since he is an Austrian fanboy himself.

Deleted post, sorry.

reply to post by Ruffian


I believe that people must look past the logical fallacies they have accepted their whole lives and then try to understand them, so that they may avoid them in the future.

Look up these authors if you would like the chance to make up your own mind:

Bernays
Quigley
Rothbard
Sutton