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Thread: Arthur Burns and The Federal Reserve

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    Default Arthur Burns and The Federal Reserve

    I have been asked why I repeatedly refer to Arthur Burns ( Fed Chairman from 1969 to 1976 I think ) as the "Village Idiot". In fact he was a relatively respected economist BEFORE Nixon appointed him to head the Federal Reserve. He was a close personal friend of Nixon and served as his chief economic advisor when Nixon was Eisenhower's Vice President. As Fed Chairman he was a disaster for a number of reasons. First and worst of all he privately admitted after retiring that he had manipulated Fed policy for no reason other than to try and help his friend , Richard Nixon. When we were in recession he lowered interest rates , reserve requirements and printed money like a mad-man. When inflation went out of control he tightened too late , too much and for too long. If you look at the charts of M1 and M2 under his reign and compare them to German and Swiss monetary policy during the same period the differences are striking. Wild erratic swings caused by continual tightening and loosening by Burns compared to slow , steady , stable increases in the German and Swiss money supplies. Which is one of several reasons why we had recessions under Nixon and Ford , coupled with high inflation that culminated in a record Misery Index under Carter i.e. inflation plus unemployment of around 20%.

    In fairness to Arthur he had a lot help from Nixon and his Treasury Department to give us a weak dollar and large deficits. Nixon was the one who took us completely off the gold standard. It could have and should have been good policy if and only IF the Fed had followed suit and followed something like the Taylor Rule on monetary growth and /or linked the dollar to gold as Volcker did. When gold went up in price Volcker tightened and when it went down he loosened. (The same thing could be done by using a basket of commodities including gold and oil and linking the dollar to their prices.) Unlike Burns he imposed relatively clear rules and standards on the Fed that controlled increases in M1 and M2 so that we had about 20 years of a relatively strong dollar ( Clinton , Rubin and Summers were very good on this btw ) AND low inflation AND healthy economic growth with lowering deficits under Reagan and surpluses under Clinton not to mention relatively free trade.

    To make things worse Burns KNEW , he admitted privately, that what he was doing at the Fed was not good monetary policy. He admitted that he subordinated sensible monetary policy to the short term vagaries and political needs of his good friend Nixon. When Nixon left and Ford came in some semblance of sanity returned but unfortunately didn't last. Under Carter , Burns returned to his old tricks and we got high inflation , a weak dollar , high interest rates and a very painful recession under Volcker and Reagan.

    I post this A. to explain my disgust with Arthur Burns ; B. to explain in part my disgust with the current Fed ( No , Melonie is not looking over my shoulder as I type this lol - I kinda wish she was and I do miss her input ) and C. to support my call to abolish the Fed. The market should be setting interest rates. The Treasury should be printing money based on a computer algorithm to give us slow , steady economic growth. Let the banks form a PRIVATE consortium to borrow from and lend each other money. Like they used to do.
    Last edited by Eric Stoner; 10-19-2016 at 10:26 AM.

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    Default Re: Arthur Burns and The Federal Reserve

    I agree with you. However, The Fed will never be abolished, how would the 1% keep control?
    XoXo Gia
    Danielle Fishell (the Dish): "If the Super-Star thing doesn't work out, Gia makes a great stripper name"

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    Default Re: Arthur Burns and The Federal Reserve

    Quote Originally Posted by Gia2608 View Post
    I agree with you. However, The Fed will never be abolished, how would the 1% keep control?
    Yeah. History has shown that the Fed has been of the big banks , by the big banks and for the big banks.

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    Default Re: Arthur Burns and The Federal Reserve

    I know! My degree is in economics, and even though I do not work in that field; I am- by definition an economist. I could start an entire new forum on the debates I have gotten into in class. Lol. Good thread!!
    XoXo Gia
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    Default Re: Arthur Burns and The Federal Reserve

    The Fed's past the point of no return. Even if they raise rates 1% they'll likely crash the system. If they keep continue with ZIRP, they'll continue to slowly destroy productivity and suck up all the wealth to the top .1%.

    The system is so broken any kind of fix will crash it.

    What's likely coming is direct monetezation, straight from the Fed to the treasury, no primary dealers, bonds with no end date. (Helicopter money).

    The only thing keeping the U.S. from hyperinflation is that the dollar is the reserve currency. When that ends, and all the dollar assets come back, it's game over.

    Some say the SDR's will slowly replace the dollar, as people sell dollar assets and buy SDR's to keep as reserves.

    10-20 years MAX.

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    Default Re: Arthur Burns and The Federal Reserve

    Quote Originally Posted by gw View Post
    The Fed's past the point of no return. Even if they raise rates 1% they'll likely crash the system. If they keep continue with ZIRP, they'll continue to slowly destroy productivity and suck up all the wealth to the top .1%.

    The system is so broken any kind of fix will crash it.

    What's likely coming is direct monetezation, straight from the Fed to the treasury, no primary dealers, bonds with no end date. (Helicopter money).

    The only thing keeping the U.S. from hyperinflation is that the dollar is the reserve currency. When that ends, and all the dollar assets come back, it's game over.

    Some say the SDR's will slowly replace the dollar, as people sell dollar assets and buy SDR's to keep as reserves.

    10-20 years MAX.
    I dunno. It's not good but imho it is not irreparable . It's why I repeatedly call for abolishing the Fed and replacing it with a computer that will print that amount of money needed for us to have slow , steady and stable economic growth. Or mandate the Taylor Rule and /or link the dollar to gold and/or a basket of commodities. The end results will all be pretty much the same = slow , steady and stable increases in the money supply.

    Direct monetization has been floated as a trial balloon by Yellen and others i.e. the Fed directly buying government debt. That would probably be the point of no return. Luckily , at least for now , it was shot down.

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