Ron Paul: Audit the Fed, Then End It!

I am in complete agreement with Ron Paul’s commentary.

The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters.

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Financial Institutions Market Cap 1999, 2009

What a difference a decade makes huh?

Courtesy of Financial Times
The fearsome become the fallen

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China challenges Dollar status as world’s currency

Zhou–backed by Russia, Brazil and India–wants to break the dollar’s hegemony in global finance. In a paper grandly called “Reform the International Monetary System,” Zhou has called for the creation of an international currency unit that he admits will require “extraordinary political vision and courage.” He suggests that we start with a blend of the dollar, pound, yen and euro–the so-called Special Drawing Rights (SDR) created by the IMF in 1969 that borrowed a concept first recommended by famed economist John Maynard Keynes.

http://finance.yahoo.com/banking-budgeting/article/106817/Dollar-Slams-Up-Against-a-Great-Wall

Moreover, he blasted the way “the global financial system relies heavily on the external credit ratings for investment decisions and risk management.” Having three U.S. ratings agencies dominate the world results in “a massive herd behavior at the institutional level. Moreover, the rating models for mortgage-related structured products are fundamentally flawed.” All true. The massive write-downs across the globe were the result of these flaws in the American way of doing things.

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Fallen Mighty Banks

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Whew…what a week for Global Markets!

As most of you know this past week was the worst week ever for most global indices.

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Global Banks on the offense with rate cuts

10/08/2008

U.S Fed leads global coordinated rate cut, eases by half point to 1.5%

Bank of England cuts from 5% to 4.5%
ECB cut by a half-point to 3.75%

China cut by 27 basis points

http://biz.yahoo.com/rb/081008/business_us_interestrates.html

10/07/2008

Hong Kong cut base lending rate by 1% point

http://www.marketwatch.com/news/story/hong-kong-cut-base-lending/story.aspx?guid={80A852B4-53BC-4CC9-8567-28D3944B54A1}&tool=1&dist=bigcharts&

10/06/2008

Japan holds rates steady, notes mounting Global crisis

http://www.marketwatch.com/news/story/bank-japan-holds-rates-steady/story.aspx?guid={8FA8F60B-1458-4B51-9DC6-717D244F4E8F}

Australia rate cut stuns, markets thirst for more

http://news.yahoo.com/s/nm/20081007/bs_nm/us_financial_centralbanks

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