Comment: The Federal Reserve banks

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The Federal Reserve banks

The Federal Reserve banks have a perverse incentive structure. While they are mandated to try to stabilize prices and achieve near-full employment, they have no consequences if they do not. They DO have consequences if they do or don't make money.

So their incentive is to adjust interest rates to, over the long term, maximize the transfer of wealth from everywhere else in the economy to the member banks. The only reason for any restraint on their part is to keep the economy running well enough to make more wealth for them to siphon off.

They have been given a license to tax the whole world's economy and to set their own tax rates. You can bet they have a better, and more quantitative, understanding of the Laffer Curve than congress. B-b

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Incidentally: Industrial process innovation increasing productivity makes it progressively cheaper to make stuff as time goes on. So prices should fall, and if the division of profits between the workers, managers, and investors remains reasonably stable the amount of stuff the workers can buy with their wages should rise roughly in proportion to productivity improvements (or a tad more slowly as some - but far from all - is paid to the inventors who came up with the improvements and the investors who paid to implement them). Even if the Fed merely succeeded in "stabilizing" prices (rather than inflating them faster than wages rise), they'd be ripping off the workers (and especially the retired).

Of course with the robbery of the workers by taxes and inflation going up to the point that we've gone from a good life with a single-income family to holding on by our fingernails with a two-income family, a question of interest is where that productivity went. As I understand it: A little went to engineers. A little went to investors. A lot went to banks. But most of it went to upper management. Why do they get it? Because the boards hire them and pay them the big bucks. Why do the boards hire and pay them? Because they ARE the "cronies" who can be "first in line" for the newly printed money from the Fed. THAT'S the value they bring to the company that lets them earn thousands of times as much as the workers who actually design and build the stuff or perform the services.

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"Obama’s Economists: ‘Stimulus’ Has Cost $278,000 per Job."

That means: For each job "created or saved" about five were destroyed.