I agree with everything here, but you seem to underestimate the ability of congress. The federal reserve is subject to congresses oversight and derives its ability entirely from congressional statutes. Remember, the federal reserve is forced to operate under laws that must be passed by the congress, so by all means they have true control.
You're misinterpreting the duel mandates. No entity can "eliminate" a business cycle or bank runs, so expecting the federal reserve to do so is kind of ridiculous. Now, unless you're insinuating that printing money when economically necessary, federal banking regulations (by the FOCM) .e.t.c. is useless, there is no way in you can be against money printing or federally organised banking.
The fed is supposed to prevent bank runs of its member banks. That is one of its purposes, to avoid panics. The fed is also to use its monetary practices to maintain a stable economy.
" The failure of the nation’s banking system to effectively provide funding to troubled depository institutions contributed significantly to the economy’s vulnerability to financial panics. Short-term credit is an important source of liquidity when a bank experiences unexpected and widespread withdrawals during a financial panic. A particularly severe crisis in 1907 prompted Congress to establish the National Monetary Commission,
which put forth proposals to create an institution that would help prevent and contain financial disruptions of this kind. After considerable debate, Congress passed the Federal Reserve Act “to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.” - federalreserve.gov
As far as our recent administrations of easing, yes they have helped, to say they haven't is akin to saying a reduction in interest rates does not spur economic growth even in the slightest (QE reduces interest rates). Low interest rates may not be the sole catalyst of a recovery, but they certainly help.
Come on now, you're using examples of some countries that printed in severe excess of their aggregate growth. Just because some nations employ asinine monetary policies doesn't mean we must follow suit. True, sht does happen (lol), but its best for everyone if we can at least some what buffer any damage expected to occur.
The gold standard does well to induce price stability, but it really means nothing in the face of a severe speculative attack as history has taught us. In the case of a severe speculative attack under a gold standard, where does our monetary base for economic expansion come from? how do we allow for economic growth/recovery, especially during a depressive state? The gold standard limits us to much and is exactly why the gold standard was left in the past. We must be able to expand our monetary base when under severe economic pressure.
The point in having a free market is that it corrects itself over time. When you have irrational exuberance the goal is
not to keep the party going. The economy will contract or take a fall. The lesson is that, hopefully, in the future people learn from their mistakes. If this is not allowed to happen, then these events will continue to happen. Necessary parts of the economy will still grow in spite of the downturn, just not as quickly. However those over speculated parts will shrink to an acceptable market level.
Of course resources are consumed more often during economic growth, this will happen whatever type of monetary policy we use, so I'm not sure why you bought that up. As for printing, inflation and hyper inflation, not all cases of money printing/money supplying results in stagflation or hyper stagflation.
Like I said we are coming to two different conclusions. This is not economic growth, this is money printing. There is a difference. More money does not growth create. lol
Growth comes from new ideas, new inventions, new production, expanding markets, new scientific discoveries, new resource finds, etc. If none of these things are happening, then that very money printing is very speculative. Growth doesn't automatically come because someone says print more money. Printing money causes resources that would not have been used to be
used up. This is not growth, this is recklessness.
Nothing new has been added for the good of the world, just paper. In the short term everyone feels good, but in the long term you realized that you cut down all the trees because PAPER made it more affordable to do so.
Economic growth must come from a growing economy, not growing paper.
How many more houses, schools, railroads, highways can be built.
Moreover, because paper can be produced in abundance there is no limit to how much real resources can be used up from the abundance of paper. There is a limit, however, to how much resources are available to the Earth's 7 Billion residents.
To explain briefly, if the aggregate value of a currency steadily increases and economic expansion occurs (though printing money if need be), the only type of inflation experienced then is the "good" demand-pull kind that inevitably occurs during economic expansion. Money printing isn't intrinsically bad as such, in fact it can help us in desperate times as explained, but it need to be managed correctly like you said.
Lastly, you're making a common mistake by assuming currency is just "a piece of paper", what is designated on the paper and its resulting demand/supply also denotes its value. For, example a blank canvas isn't worth much, right? Now if I present to you a canvas with an original drawing by Leonardo di ser Piero da Vincion on it, it is no longer just a "blank canvas" is it? It becomes a complementary item of relatively higher value, this concept is applicable to money floated on a market as well, the strike on the "paper" denotes its value, not just the paper itself.
Our main disagreement comes from how recessions/depressions should be managed. My view is that they should not be managed. Your view is that the Fed can manage them with monetary policy that can produce economic activity. I don't believe that is accurate. After a recession or depression the market will self-correct. Yes, it will hurt some, but it will do it all by itself without any intervention.
The currency
IS just a piece of paper. The only way the currency has value is because the government mandated that it is "legal tender for all debts public and private". Otherwise the value of that paper is nil. However, since it is legal tender the only other factor that gives it value is its
relative scarcity. LOL
The Federal Reserve is in charge of managing its scarcity, which also gives it its value. Too much and it is less valuable. Too little and it is worth more.
Resources are valued for their scarcity, which is why I say that printing too much money actually devalues resources. This is a power no one should have, especially since it is ineffective. Computers have made it infinitely easier for the Fed to debase the money. It is absolutely ridiculous.
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