Wednesday, June 2, 2010

Upon Which Wall Street Butters Their Bread

Question: Why are people buying gold?
Answer: Because dogs have no money?

Perhaps my attempt at humor is not ready for blog time, but if I got your attention, then that will suffice.

I have a problem with the way The Federal Reserve Bank, our central bank, conducts monetary policy in the United States. People that work should not have to invest their hard earned money in the capital markets to maintain the purchasing power that their money had when they earned it. In other words, it is my belief that, while commodity prices will fluctuate over time, our currency should not suffer a significant loss of purchasing power over an extended period of time. Those individuals, who wish to save their money in a savings account should have that option and that option should not be debased by the reckless administration of monetary policy for the benefit of the banking and corporate communities.

The fact is, individuals and institutions invest in the capital markets because there is no other way for them to meet the actuarial assumptions laid down by their actuaries to meet the financial obligations they have to their families or the institutions they represent. Pension funds, endowments, foundations and families can not, given the way monetary policy is administered by The Fed, hold onto the purchasing power of their money 20, 30 or 40 years later.

If this is the case, and the Congress can not protect the savings of average American workers from being eaten by inflation of the currency, then does it not make sense for Congress, at the very least, regulate the capital markets in a way that would level the playing field for all Americans? The way the capital markets are regulated today leaves much to be desired and yet, people do not understand that they are being moved in the direction of the capital markets for the purpose of hedging against the almost certain inflation that their dollars will suffer. Given what monetary policy is in the United States, and people's desire to maintain the purchasing power of their money, the capital markets become one of the biggest games in town.

That Congress can turn their back on the people in favor of those that make a living on Wall Street, means that the people on Main Street need to get up to speed on what is happening to their money. Until voters understand why they are being stampeded into the stock market like so many cows to the slaughter, they will continue to be the marks upon which Wall Street butters their bread.

Stay tuned.


LceeL said...

ssshhhh, Fred. I don't think you're supposed to educate the Marks. Because if they know what's going on - then they're not Marks anymore.

Robert said...

Seems like what the Federal Reserve has been doing that erodes the value of money is to keep interest rates too low for many years. Problem is, they are kind of trapped by the need to maintain employment. Higher interest rates are said, in the media at least, to slow the economy.

Possibly another way we could have adjusted to periods of higher unemployment is reducing work hours. Reducing hours rather than laying people off totally. In that case, maybe the economy would run a little slower, but have more stability.