Federal Reserve System

November 7, 2007

Does anyone know what the federal reserve system is or does? Yes, the Federal Reserve System, created in 1913, as a quasi-governmental/quasi-private banking system composed of (1) the presidentially-appointed Board of Governors, was to prtect our financial systems. So, how’s that been working? TERRIBLE. The US$ has lost 98% of its 1913 value, we’ve gone off the gold standard, and we’re headed for a financial train wreck- if we’re not already in the process.

The dollar lost 34 percent of its value since 2001!

The biggest investors and most accurate forecasters say it will weaken further as home sales fall and the Federal Reserve cuts interest rates. The dollar plummeted to its lowest ever last week against the euro, Canadian dollar, Chinese yuan and the cheapest in 26 years against the British pound. “We’ve told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non-dollar currency,” said Gross, the chief investment officer of Pacific Investment Management Co.

That doesn’t sound positive. Maybe we should all rethink Ron Paul!

Paul believes in the US Constitution- strange concept for a poiltician eh? Ron would like to shut down the Federal Reserve and go back to the gold standard. He says that he would end the war in Iraq and he would close down all our 120 military bases that are spread across the face of the globe. That sure would alienate the military vote.

Banks are afraid to even loan to other banks! How weired is that? Lending conditions are not as dire as they were last August when interbank loans of all durations were severely squeezed and the commercial paper market all but shut down. But the fear of making year-end interbank loans shows an unusual level of nervousness and precaution.

My bet is that the Federal Reserve will not be around to celebrate their 100th anniversary. What that means I do not know, but looking back over it’s history, can it be all that bad?

Written by Ernie · Filed Under Daily Commentary