Getting an entire global financial system to change, it is "madscience" indeed. Commodity based financial systems crash violently as history will show, much worse than fiat currency has which has been based more on regulatory failure or speculation bubbles which also happen in commodities trading. Any move towards dismantling the Federal Reserve without any proper plans for another central bank would lead to panic and the dollar declining faster than you could possibly imagine. Unless you're building the country from scratch, it's not bloody likely. Let's not also forget the debt that the Federal Reserve holds, not just on the US government but other financial institutions. Then there's the credit rating agencies, they dropped the rating to AA+ because Congress can't agree shit, now put that into a situation in which the Fed is considered for 'demolition'. Panic would ensue.
We will be building new countries from scratch if we don't get rid of the Fed.
Why are you so sure that such a revolutionary change is impossible? It happened at least once before, when the Fed was created. It wasn't quite 100 years ago. For the majority of this country's history, the Fed did not exist. It is nowhere near as essential as you claim.
It's more than essential because country's change and evolve, it's a sad reality. The United States can't just write off debts unless it defaults which would lead to a depression of ridiculous proportions. I'm more supportive of reforms rather than dismantling because the real world simply doesn't work that way. The United States has debt commitments to honour and debt owed by other nations and institutions, scrapping the Federal Reserve is something that would take years to do and a credible transition would be needed.
The collapse of other financial institutions that depend on the Fed would be a good thing. And there would be no depression, because along with debts owed by the banking system, debts owed to the banking system would also be cancelled. It would be a huge economic boon.
The only minor difficulty would be converting to a new currency. Less than 0.5% of all the "money" in our economy actually exists as paper currency issued by the Fed; the rest is just numbers in bank accounts. Simultaneous with converting the banking system, we would have to convert all personally-owned deposits of that imaginary currency into physical currency and make it available for issue.
These other institutions are significant international banks and other nations in debt to the United States. There would be a catastrophe because the Fed is part of a globalised system. It's delusional to think there would be no hazard.
"without any proper plans for another central bank"
Would you not consider it a "proper" central bank for an accountable Federal agency to be directly responsible for the issuance of currency? Or did you just assume I wouldn't replace the Fed with anything at all?
I don't even agree with Ron Paul's obsession with a commodity-backed currency. I think fiat currency is acceptable and practical, provided it is not multiplied by fractional-reserve lending.
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timeasmymeasure
no subject
Date: 2011-12-18 06:14 am (UTC)It will happen.
no subject
Date: 2011-12-18 02:47 pm (UTC)no subject
Date: 2011-12-18 05:38 pm (UTC)Why are you so sure that such a revolutionary change is impossible? It happened at least once before, when the Fed was created. It wasn't quite 100 years ago. For the majority of this country's history, the Fed did not exist. It is nowhere near as essential as you claim.
no subject
Date: 2011-12-18 05:52 pm (UTC)no subject
Date: 2011-12-18 06:12 pm (UTC)The only minor difficulty would be converting to a new currency. Less than 0.5% of all the "money" in our economy actually exists as paper currency issued by the Fed; the rest is just numbers in bank accounts. Simultaneous with converting the banking system, we would have to convert all personally-owned deposits of that imaginary currency into physical currency and make it available for issue.
no subject
Date: 2011-12-19 05:19 am (UTC)no subject
Date: 2011-12-18 05:48 pm (UTC)Would you not consider it a "proper" central bank for an accountable Federal agency to be directly responsible for the issuance of currency? Or did you just assume I wouldn't replace the Fed with anything at all?
I don't even agree with Ron Paul's obsession with a commodity-backed currency. I think fiat currency is acceptable and practical, provided it is not multiplied by fractional-reserve lending.