That’s a fair question these days.
Watching the stock markets rise and fall these past few years has almost always
been accompanied by nasty comments about the Federal Reserve banking system,
and FRB Board Chair Bernanke. Evidently they can do nothing right. But I think
this is a biased view from so called market specialists, industry wogs,
republicans and entrepreneurs. They seek what? Market stability? Why? No money
is ever earned form a stable market. It is the changes, the ups and downs that
create the price differentials that generate income for investors. Market
mechanics earn their money from the volume of stock traded, not intrinsic
values of the stocks.
So, just what is the message
enemies of the Federal Reserve System want us to hear and learn and agree with?
I am not at all sure.
Last I heard, the FRB’s sole
purpose was to maintain liquidity and safety of the nation’s banking system.
They are to bleed excess energy from a booming interest rate market to avoid a
bust, and to pump up the system should a bust occur. It is the tweaking of the
system to keep away from booms and busts
that occupy the time and energy of the FRB. That’s how the system was designed
back in Alexander Hamilton’s day. The framers of the US Constitution worried
about central banking, central monetary policy and the powers that could
manipulate the country in and out of economic cycles. They wanted to avoid
pernicious behavior by scalawags. They mostly were successful.
Now, the message broadcast by the
business and finance media is a chorus shouting stability, rate reductions,
rate increases, protection from risk.
Do I need to remind them and
everyone else that risk is what an investor, a business person does in order to
earn a return on their investment? Risk is the great unknown. The lower the
risk the smaller the return. The higher the risk, the greater the return. Of
course, if the risk proves to be true and the investment is lost totally, then
that’s the price the investor pays. Don’t like those terms? Don’t invest.
Those who have invested in America over
250 years of our history have earned huge wealth. It is not guaranteed. Many
others lost great wealth. There is a middle point to consider: regulatory
authority that protects the masses and is paid for from reduced risk to
investors. We all pay for the gain for all. Simple. Direct.
No one investor gains a huge
advantage over another unless they are willing to go rogue and take large
risks. If they do and they win, they deserve the gains. If they do not win,
they have no one to complain to. Pretty basic, huh?
Yet we hear that FRB chairman
Bernanke is supposed to wave a magic wand over the chaos others have created
and won’t cooperate to repair, and fix the problems. Bernanke cannot do that
without damaging the system. Risk is
endemic to our system. The players have to play the risk to win or lose on
their own decisions. It is not the FRB’s job to make this easy; just safe. But
it takes cooperation and a sense of fair play.
Lest anyone get confused, the FRB
has powers separate from the Supreme Court, the White House and Congress. It
was designed this way. All the players know this. Saying anything other than
that is a political game designed to lay blame at the feet of those who have no
responsibility or authority to fix it. It is a game by game players who wish
you and I not to understand the truth.
So, let Bernanke do his job. Let
the banking system do its job. Let Congress do its job (although that appears
to be null and void on delivery!), and let leadership in the White House have a
chance to work.
Lord, this is like watching a bad
game of kick ball on the playground of the local elementary school! Nothing but
puerile pranks and nonsense.
I thought we were better than that
as a nation! Our promise is great if we but give it a chance.
September 8, 2012
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