On 18 Apr 2014
It's not the fed,
The fed is primarily a psychological manipulation machine that assures people things will be okay during bad times and assures they will not allow the economy to overheat during good times.
I think you overstate the Feds irrelevance. For one thing they are an integral cog in the complex banking machinery that gives us our money. The psychological manipulation you refer to when the fed tries to engineer "soft landings" and so on has a very real aspect to it, which is the pricing money (ST interest rates) for the big financial market players, among others.
The argument is an interesting one. For my part I'm agnostic, but I think that you overstate the feds irrelevance almost as much as some of the
Austrians overstate their fiat currency versus gold backed dollar arguments in the opposite direction.
When we eventually "pay the piper" so to speak, the games the fed has played to effectively postpone this , will I think have been a major contributor to the magnitude of our problems. In a sense, they have been at the helm during the biggest global credit bubble in modern history.
Ever notice how much people used to talk about the so called "carry trade" back when Japanese interest rates were so much lower than all the other countries. People would borrow yen to buy securities in other countries, only having to more than cover the near zero interest rates ?
I haven't heard nearly as much about the "carry trade" in more recent years when it was US interest rates that were so very low. But wasn't the carry trade still here? How hard is it to figure out a way to earn over 1.5% on money when you are deeply capitalized with all of the modern tools and technology ?
I just don't know Iwog. I agree with your thesis about too much capital looking to be invested, and tax rates being too low in some quarters, but I see the system as being broken in other ways as well. That is in ways that are facilitated by the Fed.
If it can be said that we are addicted to debt in an unhealthy way, then it might also be said that the Fed (not all by itself) is an enabler.
The fed didn't bail out the banks, the treasury did.
But the Fed has propped up (maybe overstatement) the treasury in unprecedented ways in the past 6 years.