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Reply #30 posted 10/31/11 10:08pm

DarlingDiana

Tremolina said:

^

Let's first assess that Milton Friedman changed his mind several times during his carreer. First he was for Keynesian monetary policy ("stimulance"), then he was very much against it for most of his carreer (classical "inflation control") and then in the end, he was more or less for it again. He may have been one of the most influential economists of the 20th century, but he certainly wasn't the most consistent.

Friedman's ideas moreover were very much adopted by the Reagan administration. And also Thatcher in the UK. It was under Reagan and Thatcher, in fact, that the US and UK governments started letting go of control over the financial markets and it was also under Reagan that the current US government debt crisis was born.

The Reagan administration was not the birth of the debt crisis. Ever since the institution of the Federal Reserve the growth of debt has been out of control. But if you want to pinpoint a birth it would be 1933.

So there goes your point already about "an institution created in secret by banksters, that caused two of the worst economic recessions/depressions in US history, was created to stop exactly what it later caused". The Fed was not created "in secret" but was set up by LAW of CONGRESS. And it did NOT cause "two of the worst rercessions/depressions in US history".

You did nothing to make the case the Federal Reserve did not cause the Great Depression and the 2008 recession except say that Milton Friedman changed his mind. It caused the Great Depression through deflation and it caused the 2008 recession through artificially low interest rates.

It was created in secret. The law was drafted in a private meeting between bought Senators and powerful bankers.

So at the end of his life, Friedman came back on some of his long time mistakes of focusing too much on classic inflation control and not also stimulance, to blame just the government for the Great Depression and not also the Fed, and to oppose other price control mechanisms like wages as "too much government", instead of also embracing those. Why do you think he did that?

Do you have a source for that? By the end of his life he was advocating the complete abolishment of the Federal Reserve. If anything he went stronger on his convictions, not softer, and he took his criticism of the Fed to the logical conclusion. Its problems are inherent in its institution. End the fed!

Though his optimism about the nomination of Ben Bernanke to the Federal Reserve Chair is amusing in hindsight. It's not surprising. Bernanke promoted himself as a Chicago school Monetarist, a free market capitalist, a big fan of Milton Friedman. But we know how much people can change once they actually get into positions of power. e.g. "Change you can believe in".

When you read closely what he says, he says that the Fed initially did not actually cause that already deep economic recession, but that its monetary policies at the time were so bad, that it was turned into a severe depression.

If you read what he said closely you'd see he made note to separate the recession from the subsequent depression. But his is just the prevailing opinion, more free market liberal economists like Hayek (Keynes' one-and-only real peer and colleague at the time) did blame the Fed policy for the recession because of it's policy response to the rapid growth of the 20s and its fear the economy was growing too fast.

Now what were those terrible policies by the Fed at the time? They were NOT Keynesian, like the current Fed and Obama's policies are now (but Congress blocks). The Fed back then did not want to lower interest rates much, did not want to bail out many of the failed banks and did not want to put more money into the economy to stimulate (job) growth and tackle the recession.

NOPE: not willing to help out (especially many smaller) banks and afraid of inflation going out of control, they did the OPPOSITE. They did not lower interest rates to make it much cheaper to borrow money and get the system rolling again, they did not bail out bad banks, but instead let them go down, including all the savings money they carried and thereby they also did not pump enormous amounts of money into the economy, but instead took an enormous amount out of it, leading to one the biggest downturns in the US economy, plus the world, ever. See also:

Did I ever say the Fed was Keynesian? Did Friedman? What's your point here? Friedman was a fan of Keynes. He said Keynes would be embarrassed to see how people have interpreted his research.

So, no the Fed is not the cause of this crisis, nor of the great depression. It DOES play a very important part in both, true. In the first a bad and currently a more positive one. But they are not "the cause".

What a thing to say. The Fed is playing a more positive role in this crisis. Corporate suck-up! So the Fed's policy to keep interest rates low when they need to be much higher was positive? The bailing out banks, foreign and domestic was positive? Quantitive easing was positive? Please justify this.

The true causes of the current crisis lie in RR's policies, that started the deregulation of the financial markets and that were completed under GWB II, as well as in institutionalised greed by many of the big financial players, as well as with many millions of ignorant and careless consumers.

What specific regulations were repealed By Reagan and GWB that led to the 2008 recession? Remember, Glass-Steagall was repealed under Clinton, who you didn't name. But the repeal of Glass-Steagall was not a big deal anyway. Wavers to the Glass-Steagall rules had been granted many times before the law was repealed under Clinton. The European financial system, glorious socialist-democratic Europe with its model of well-regulated capitalism progressive aspire to, never separated commercial banks and investment banks in the first place. We only needed to do it because the government insured bank accounts so that if a bank lost your money the government would bail you out. This shifting of the burden of responsibility made speculation with depositor's money so prevalent that the government need to separated commercial banks from investment banks. That's why there was a spike in speculative trading after it was repealed, BUT there's no correspondence between institutions that benefits from the repeal and those that collapsed in 2008. Lehmann Brothers and Bear Stearns for example did not take advantage of the Glass-Steagall repeal and they were the institutions that failed most spectacularly. In part because they lacked the stability provided by commercial banking deposits ironically. The lack of Glass-Steagall actually helped as Bank of American and JP Morgan Chase were able to acquire Merrill Lynch and Bear Stearns. Which they would have been prohibited from doing under the Glass-Steagall rules.

So besides the predictable example of Glass-Steagall that people always bring up, although the don't understand it, what specific examples of deregulation by Reagan and GWB caused the 2008 recession?

[Edited 10/31/11 22:16pm]

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Reply #31 posted 11/01/11 2:29am

Tremolina

"corporate suck-up" falloff

It's fine to disagree DD, but let's not go there. Not only is it childish, you are also way off base with such qualifications.

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Reply #32 posted 11/02/11 1:12pm

DarlingDiana

Tremolina said:

"corporate suck-up" falloff

It's fine to disagree DD, but let's not go there. Not only is it childish, you are also way off base with such qualifications.

I just see a lot of defense of a private institution run by corporate bankers, apparently coming from someone on the left who supports Occupy Wall Street. Maybe you are confusing it with a government agency and that's why you are defending it. It's not a government agency. The only thing I can think of is that you see it was strong regulation and central planning of the economy, which it is, and so that's why you are defending it. Otherwise it's completely out of character.

So you got a little bent out of shape over me calling you a "corporate suck-up". I'm sorry. Now defend the statements you made that by the end of his life Milton Friedman essentially became a typical moderate-progressive Keynesian who believed in government spending and stimulus. Because in actually he was never more radically libertarian then his last decade of life. He called for the legalization of all drugs down to heroin, he called for the abolishment of the Fed. In this 1960s/70s heyday when he was the golden boy of economics and the poster boy of free market capitalism and libertarianism, he advocated a negative income tax. That's a flat tax of 25% on everyone and a government handout of $10,000 to everyone, essentially guaranteeing everyone a minimum income. It was an income floor. Very moderate to say the least for a libertarian. By the end of his life, a 25% flat tax was way too high and a $10,000 income floor was completely out of the question. I think the opposite of what you said is true. He went further towards libertarianism, volunteerism, free market capitalism.

So that's important point to clarify because it's your sole reason for dismissing Friedman's research on how the Federal Reserve contributed to the Great Depression. When you're done with that you need to back up your statement that the Fed is playing a positive role in the current recession. How so?

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Reply #33 posted 11/02/11 7:26pm

Graycap23

DarlingDiana said:

Tremolina said:

"corporate suck-up" falloff

It's fine to disagree DD, but let's not go there. Not only is it childish, you are also way off base with such qualifications.

I just see a lot of defense of a private institution run by corporate bankers, apparently coming from someone on the left who supports Occupy Wall Street. Maybe you are confusing it with a government agency and that's why you are defending it. It's not a government agency.

It's interesting isn't it? I find it a BIT strange.

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Reply #34 posted 11/08/11 5:46pm

angel345

President Kennedy tried to abolish the Federal Reserve. See where he end up?

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Reply #35 posted 11/08/11 6:32pm

DarlingDiana

angel345 said:

President Kennedy tried to abolish the Federal Reserve. See where he end up?

Our last real President.

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Reply #36 posted 11/09/11 8:21am

angel345

DarlingDiana said:

angel345 said:

President Kennedy tried to abolish the Federal Reserve. See where he end up?

Our last real President.

nod

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