Why The Fed Isn't Worried About Inflation

I've been thinking a lot about why the Fed is so willing to print money (ie quantitative easing).  Essentially, there are 3 reasons they are not worried: money supply, velocity of money, and wage deflation.

1. Velocity of money, how quickly money moves through the economy, has to be high for inflation and it is really slow right now.

2. The money supply was extremely decreased by all the debt discounting and write offs that happened as a result of the housing crisis. A decrease of the money supply leads to deflation, which is really bad. To counter that they are printing money.

3. The average median household income has dropped almost 10% recently. This is very bad. When people make less, they spend less. When people spend less there is less money in circulation and that can lead to deflation (ie bad).

The fed isn't worried, and I am not worried, about inflation in the short term because it isn't likely to happen. It's more likely we see a deflationary period that can be very damaging to the already weak economy.

Long term the fed thinks they can take out the extra money by selling the debt they have been purchasing. This is only possible in pristine economic conditions that are not likely.

It is more likely that in the long run quantitative easing will cause more economic woes than it has prevented. It has always been this way, and as they say "history repeats itself."

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How To Eliminate the Fed

I have to admit that this is not my plan. In fact, I'm not even sure ending the Federal Reserve would be a good idea. This plan is outlined in the book "The Creature From Jekyll Island." The point is that you can't just make the fed disappear overnight, because that means our currency, literally the blood of the economy, would disappear as well. There has to be a systematic plan to break our dependence of the fed, and replace our currency with something better. Although, some of the steps are simply summarized, this is the path. This is how it could be done.

Step 1: Repeal Legal-Tender Laws: Right now the Fed note is legal tender for all debts, public and private. By repealing legal-tender laws Fed notes will still be accepted to pay your taxes, but private individuals will be free to reject or discount them as they see fit. It will also no longer be the "official" currency of the United States, freeing it up for Step 6.
Step 2: Freeze the Fed: Freeze the amount of Reserve Notes except for what is needed in Step 6 & 10.
Step 3: Restore Silver Dollar: Define the "real" dollar in terms of precious-metal content (ie silver dollar). Silver is a classic and historical success. It is by far the most successful currency of the past and hopefully the future.
Step 4: Establish Gold Back Up: Establish Gold as an auxiliary monetary reserve which can be substituted for silver when necessary; not at a fixed ratio, but whatever ratio the free market allows.
Step 5: Restore Free Coinage: Allow anyone to bring in precious metals and have the mint turn them into gold/silver coins. This allows for the market to adjust the money supply as required to avoid inflation and deflation due to money supply constraints.
Step 6: Pay Off National Debt: Pay off the national debt with Fed notes. Yes, this will cause Fed notes to inflate, but the deed has already been done. Congress decided long ago that we would use Fed notes to pay off the national debt. It's the only thing we have available to do so, but by doing Steps 1-5 we can free the economy from some of the consequences so it can live to thrive another day.
Step 7: Pledge the Fed's PM Reserves: The Federal Reserve claims to have a horde of gold. That gold should belong to the citizens and needs to be used to back currency like it was originally intended.
Step 8: Determine Real Value of Fed Notes: Determine the weight of the Fed's Gold and Silver reserves. Determine the number of Fed Notes in circulation. By knowing the number of notes and the amount of reserves, determine the actually value of Fed notes in real silver dollars.
Step 9: Retire Fed Notes: Now we know what they are worth, offer silver and gold reserves in exchange for Fed Notes. This will retire the Fed notes from circulation and add Silver Dollars into circulation in equal numbers.
Step 10: Issue Silver Certificates: When retiring Fed Notes, give the option to take the coinage or notes that are 100% backed by silver. Silver certificates will become the new paper currency.
Step 11: Abolish the Fed: We have basically eliminated all that the Fed did and therefore all reason to have the Fed. It's time to abolish the Fed.
Step 12: Re-Itroduce Free Banking: NO MORE BAILOUTS! Cut them loose from all protection at tax-payer expense. Replace FDIC with private insurance. Require banks to keep 100% reserves for all demand deposits.
Step 13: Reduce the Size of Gov't: The scope of government should be limited to the protection of life, liberty and property. NOTHING MORE! When the government tries to do too much, it does nothing well. It becomes a strain on the people and the economy. The Fed is our 3rd national bank. BIG GOVERNMENT = NEW FED. There is no point in eliminated the Fed without decreasing the size and scope of the government's power. Otherwise, we will just get a "new" Fed in a few years.
Step 14: Restore National Independence: Big Government and Tyranny is a threat on the domestic and international level. The only way to protect ourselves from global tyranny is by limiting our interdependance with foreign governments.


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Creature From Jekyll Island by Edward Griffin Review

No this isn't a fiction book. Parts of the history of the Fed seem like fiction, but they are not. In fact, if you're not into history and finance parts can be a bit boring. However, this book is very well organized and very well written.

The Fed was not the first federal bank. In fact it was the third. Each of the previous two had disastrous results in so much that it took secret planning and two attempts to sneak the Federal Reserve into reality. It's not conspiracy theory. It's a well documented conspiracy fact!

This book gives you the basics of banking, the history you need to understand the Fed, a realistic picture of the Fed, an idea of where we are headed if we stay on our current path and how to fix it.

Nothing about the fed is good. It is the largest and most powerful cartel in the world, built on the backs of the tax payers, and created to protect the rich bankers. The stated mission is to protect the economy from wild economic swings, but as we all know, EPIC FAIL!

This is the BEST BOOK ON THE FED I'VE EVER READ!  It is absolutely a must read for every Financial Survivalist. I wish everyone knew this stuff.

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Don't Audit The Fed!!!

Anyone that thinks the world's important financial markets still believe that the Fed is using any kind of sane reserve ratio is mistaken!

The world knows the Fed is broke. They know that the game is a farse! So why do they still play it? Because it's the only game that is played! It's been played for 100's of years and if you know how to play it you can make lots of money!

The only thing auditing the Fed will do is WASTE TIME. The audit would be held up and lost in endless government bureaucracy. It would be an excuse for politicians say they are doing something. Years later we would find out what we already know and nothing would change, because no one cares and no one would be surprised.

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