BleepingComputer.com: Replacement system for the Federal Reserve

I have been doing A LOT of research on this subject, the problems i have noticed with the federal reserve are that they will back any bank regardless of how that bank invests their money. This causes banks to lend out riskier loans, not all banks, which have a higher chance of failure. Thus the banks begin to destroy wealth by lending money , $200,000 is one example, too people who have a 40,000 dollar a year salary when they would not do that if their loans were not backed by the federal reserve (I am not saying that all banks do this because they have their money backed by the Fed but it does increase the numbers of banks making riskier loans that are bound to fail).

The reason that banks do this is because the sell the loans to debt collection agencies that will collect the money for them, in a manner that they earn profit. Now if the Federal reserve did not back banks that were making risky loans bent on profit without regards for failure then less wealth would be destroyed. this is not the only flaw with the federal reserve. i recommend you watch the the finance video category on the website "khanacademy.org" if you want a better understanding of the federal reserve.

(quote) If looking for a replacement to paper money that would be available immediately today as EFT = Electronic Funds Transfer and simply eliminate paper currency.(/quote)

I second this motion, for in the case where your are spending more money then the value of the bill you create you are destroying wealth. This also brings to question whether this system is manipulable as well, in the reason that how would you create this virtual currency?

Would you encrypt each single currency 1 with a specific code that varies in length? Who would have power over creating new Virtual Currency (VC)? Who would decide when to create more or when not to? While VC has its benefits, it can still have the same drawbacks.

This post has been edited by Alexander Caldwell: 02 March 2012 - 08:49 PM

Bartering products with another goods will no longer work with this kind of civilization. With remote areas where economic change and way of living is simple, I could say YES but if we'll talk about the whole world at large, I don't think exchanging goods will work. English system has been replaced by the Metric system because things and measurements differ when it comes to output. Just like a stone that values $500 with exchange to a laptop that only costs $50.

We're now in the new era. With people having different culture, barter could be the inherited tradition and we can't question that matter but if we'll talk United States as a whole, I don't think such trading will come into realization.

I agree with you the_patriot11. The problem is not the currency-the problem is greed. The greed is too much I can say. The government keeps producing money to buy and supply the needs of the State economy but I'm wondering why it has lot of debts. Well, this is one of the disadvantages of using money. Someone will have the so-called "DEBT".

this is not always the case. When the Fed makes loans or bad decisions that is what causes debt. If the Fed instead lent their money in manner that created wealth then there would not be this looming debt crisis.

this is not always the case. When the Fed makes loans or bad decisions that is what causes debt. If the Fed instead lent their money in manner that created wealth then there would not be this looming debt crisis.

wow way to oversimplify. what the federal reserve does. pffft the federal reserve, is not why were in the situation were in today-its because americans, from joe blow off the street, all the way up to the president, seem to think its ok to spend money we dont have, and when that backfires, to throw more money at it. Even if we did a "bartering" system, I suspect we would still be in sever debt.

@ the_patroit11,

I suspect that your right....

MissPlaced

@ the_patroit11,

I suspect that you're right too...

Yep, I can imagine that too.
"I'll swap your bike for five nintendos when I get them next Spring (with interest at 20% APR)"

Over simplifed indeed. What i mean by this is when the fed backs banks that lend out bad loans while being bent on profit (not all banks), wealth is destroyed. The fed should create stronger regulations to prevent lending to banks who have bad loans out. For example being able to analyze what loans the bank currently is lending out.

Bad budgets are not the only reason we are in this recession. While the average American should be more conscious about building debt, Fed backing bad banks causes riskier behavior. Say a bank wants to make a lot of profit very fast, the way they would do this is to lend out riskier loans that offer higher returns. How do you get investors who are willing to risk their money at the chance of not only not gaining profit, but losing their money as well. The answer is paying the Fed a certain amount of money each month to insure their investors get their money if their loans fail, much like paying insurance in case you get into a car accident. The problem with this is the Fed is charging to little money for this insurance, to the point where it is being abused.

Corporate greed is a stronger greed than civilian greed, unless you want to bring up when loan standards dropped to the point where house squatters could get a ~80k loan with 0 down. Greed on the corporate level can start bank runs among other things. These greedy actions destroy the wealth created by good lending.

I do not believe a bartering system is possible anymore. I have watched quite a few videos off of the khanacademy.org and see the flaws in my initial thinking, also the benefits in having a medium of exchange, but i cannot change my initial post so there will likely still be people commenting on this initial not researched thought.

This post has been edited by groovicus: 16 March 2012 - 11:17 AM
Reason for edit: removed attempted quote

while corporate greed is bad, it starts at home. Its the mindset of America-I want to get what I want now, whether it be from joe blow buying a house he cant afford, or a bank official making a bad loan because he wants the extra buck, it doesnt matter-its not entirely coporate americas fault were in the shape were in, but its not entirely the "average citizen" either we all share equal blame. But it just goes, again to show, its not the federal reserves fault were where were at today, its our own, and changing to a bartering system wont fix anything.

@ the_patriot11,

I know that your speaking in general term's...

But as for me, I've always believed in "Living AT or Below my means"
I don't have or use credit cards( The one time that I did have a credit card(Sears) It was cancelled because I payed it off early, That used to give you a better credit rating,,NOT ANYMORE

Here In the Cradle of Idoicy, they have built houses all over the place on my little "Country Road" in the last few years...I just saw a sign in front of one of those monstrosity's(sp?)( I wouldn't live in one of em as a ghost!)There touting an eco-friendly playground....What the buyer's don't know is that for generation's their little piece of real Estate was a Dairy Farm....soo yeah their little playground is eco - friendly.....it's been well fertalized with manure for decades.. But I guess if you put the right spin on it you could sell hell to the devil...The point i'm makin here is this, these folk's are in the process of "BUYING" a $3000.000.00 house and their up to their neck's in debt, because of exactly what you just said! and I know that their NOT getting their money's worth( I've seen how their building those Monstrosity's)...soo it's gonna be fallin apart before they finish payin off the morgage...soo more debt to fix and repair...ECT....

I may not have the best in the west, but I sleep very well at night...because I live at my mean's and taught my children to do the same!

RESPECTFULLY

MissPlaced

yes it was more of a general statement, as America as a whole, I realize not everyone does that nor was I pointing fingers at any one person.

@ the_patriot11,

OOooo I know that you weren't pointing a finger at anyone!

My post was a kinda long way around the barn way of agreeing with what you said.


MissPlaced

What I am understanding form what you are saying is that humans need to learn to make smarter decisions.

My questions for you are; what is a smart decision?; What makes your mentality superior to their mentality. I used to argue that humans should live in small houses and be economically wise. Then I realized that the earth is going to die in a few million years so, what difference does it make?

The man who lives on the street is no better situation then the woman who is a millionaire or the middle class family who spends their time doing what they love.

If someone's wish is to live for a short time in their dream house until they succumb to debt. What makes them inferior to you? Every single human on the planet holds different ideals. What makes one more valuable then the other?

If a corporation wants to be greedy it does not impact me(well yes it does but not really if you think about it). A corporations greed impacts my values. How con you call one value superior and another value inferior?

it has nothing to do with someone being better then someone else, it has to be wise. Theres a larger scale-living in a house you can't afford and then defaulting on it doesn't just affect you, if it did then I wouldnt care either but it affects other people. When you default on a loan, thats money out of the banks pocket, and yes they have mouths to feed to, but one person defaulting isnt a big deal-when lots of people default and lose the house, then that really hurts the banks profit, next thing you know the banks defaulting, which even affects those of us who are living in a house we can afford, because if the bank goes under, we lose our money. It happened during the great depression. So by defaulting on a house you should never have bought in the first place, not only are you affecting your life and your happiness, but the lives and happiness of many others, and so many people don't see that.

HI,I saw somewhere in the past the IRS was going after people that used barter system to get
the goods they needed,since the barter system is hard to track and tax.
Several of people running this country were complaining about the TRILLION DOLLAR under ground
econnimey,but they fail to realize that to these people it may be the only way that puts food and a roof over their heads and in the real world they just trying to exist day by day.
With what it cost to exist in today's world we are not talking about a lot of money,but our
leaders much rather destroy it if they can not control it.
To show our how leaders think i remember in the past someone thought it was a good idea to tax
a SECOND MORTGAGE as if it was income,