Reducing Deficits – Can the FED

The United States Government has been running increasing deficits. The Government continues to spend excess liquidity from the Social Security fund paid by workers over the past 75 years. The government knows that the contractual agreement of Social Security will bankrupt the government if they do not replace these funds or cut costs. Their answer is to reduce contractually agreed benefits placing the burden on those who contributed to the fund.

I suggest a different answer. Let’s eliminate useless agencies. The FED has become nothing more than a Sugar Daddy for speculative financial institutions. When the cute smoke and mirrors service sector known as Wall Street makes mistakes the FED intervenes and congress bails them out. This makes the real economy, what is left of it, uncompetitive on the world markets. Originally the FED was designed to control dislocations and excesses of the financial markets however in today’s Reaganomic based financial scam Wall Street completely dictates the actions of the FED.
The FED costs the US taxpayer a great deal of money. Additionally it is responsible for bubble creation and facilitates the devaluation of the dollar by increasing M3, conveniently eliminated from FED policy several years ago. Banks are encouraged to enter into speculative operations by easy money. Individuals are encouraged to spend more than they make because there is no return on savings.

The FED is thinking only about the short term. It does exactly what Wall Street calls for but we have learned that short term focus is usually not in the best interest of any entity. I guess the old adage, “Eat drink and be Merry for Tomorrow We Die!” is the FED’s motto. The FED is doing exactly the opposite of what it should be doing in the long term. We see the disastrous policy expressed as LIBOR spreads continue to increase. In fact we see other interest rates remaining high while the FED lowers rates. The dollar is sold as the Economic Policies of the US are seen as creating greater future problems. All said, the FED is creating more problems than it solves. If an agency costs money and we need to reduce the deficit and the agency is not performing its mandate then get rid of it.