http://blogs.cfr.org/setser/2008/12/31/relitigating-1998-at-the-end-of-2008/

the failure was to go to the edge of the precipice, and then not build the oversight structure to address sources of opacity, contagion and systemic risk.

that was the dry tinder… the kindling was the deals that would blow up if a major counterparty got downgraded or if house prices ever declined.

with this: “I don’t place the blame for our “can’t do” condition on the Federal Reserve system. I place it on the growth of the “painfree ethos” in our culture, and on the general apathy and complacency that has developed as a result…”

the ‘painfree ethos’ was inseminated by the creation of the USG/FedRes Duopoly..

Need more ‘money’? Don’t want to raise Taxes? Fear cutting other Spending?

No Problem, we, here at the FedRes can serve your needs..think NINJA loans have gotten a bad name? don’t let it worry you, we’ve a better deal for you~

Your Notes are Good @ FRBNY, our Window is always open for you-the USTreas..

Someone’s telling you that your Notes amount to a Chattle Debt on your kinder? They’re ‘Chicken Little’!

When times improve, pay us back, it’s that simple..

And, sadly, we’ve been that Simple.

Legal Tender is the ripest Monopoly on the Board, makes Boardwalk look like a Foreclosed Baltic Ave.(in Detroit..)
~~
and, w/this: “my point is the fact that we were able to build it to begin with – all in the presence of the Fed Reserve system”– two things, you should compare the Infrastructure/Asset Base built before ‘71, and that after ‘71, at least two ways, total amount, and quality, and see what you come up with..

as well, understand that the FedRes is just a different kind of ‘Toll-taker’–if there’s no Traffic, there are no Tolls–it has been in their interest, for their interest in Interest, to keep the road attractive while the Traffic could traffic, we’ve been running out of gas, we get much less traffic for our marginal unit of Debt, this game is fixin’ to go into Reverse–prob is, the FedRes can never refund the Tolls –their units of account are fictious, only their Power is real..

“BTW, who would build / rebuild the infrastructure if the libertarians ruled?”

see: The first American turnpike road was a state enterprise, authorized by a Virginia act of 1785. The first American turnpike to be constructed and operated by a private corporation was the Lancaster Turnpike built (1792) in Pennsylvania. Thereafter turnpikes were regularly private enterprises, and turnpike corporations held the leadership in the development of the American corporation system. The construction of turnpikes proceeded rapidly, and by 1825 a map of the Eastern states showing the turnpikes would have looked much like a present-day map showing the railroads. Famous turnpikes included the post road from New York to Boston (now part of U.S. 1), the two roads from New York to Albany (on the two sides of the Hudson River), and the roads from Albany to Buffalo, main lines of communication with the developing West.
http://www.infoplease.com/ce6/bus/A0861667.html

guess where some of the first dividend-paying shares came from?

If Rand was alive, she’d likely have been bashing Greenspan long before LTCM. Seeing him morph into certified politician, wanting everyone to love him and think of him as the maestro, she would probably have denounced him in no uncertain terms.

From your post, “The Minneapolis bridge, it said, the Manhattan steam pipe, and New Orleans’s “substandard levees . . . are some of the most dramatic signs of the nation’s failure to maintain and enhance its aging physical structures at a time when demands on roads, transit systems, sewage treatment plants, and other vital facilities are rising.””

That some of our infrastructure is seriously degrading is a given (yet another consequence of the denutting of government by free-marketeers), my point is the fact that we were able to build it to begin with – all in the presence of the Fed Reserve system – is evidence of our success and the Fed’s benigness.

BTW, who would build / rebuild the infrastructure if the libertarians ruled?

Also from yours, “On that day, John McQuaid, a Pulitzer Prize–winning journalist recently with the Times-Picayune in New Orleans and now based in Washington, D.C., as a fellow with the Open Society Institute, wrote an op-ed piece (“The Can’t-Do Nation: Is America Losing Its Knack for Getting Big Things Done?”) for the Washington Post in which he stated that America is losing its reputation as a problem-solving nation—one that once constructed such great engineering projects as the Panama Canal and Hoover Dam—and instead has become a “can’t-do nation.””

I don’t place the blame for our “can’t do” condition on the Federal Reserve system. I place it on the growth of the “painfree ethos” in our culture, and on the general apathy and complacency that has developed as a result of our prosperity over the last half century – realizing much of that has been false in recent years due to our over reliance on debt, but that does not diminish the detrimental effect on the character of easy living Americans.

Therefore, I don’t see how eliminating the Fed reverses our ongoing transformation from a “can-do” to a “can’t-do” nation.

Back to reading.

w/ this: “But if we dissolved the Fed tomorrow, what would happen to our economy?”– No Economy can move, seamlessly, through a wholesale shift in its core functions. Even after ‘13, the people-facing ‘Gold Std.’ lasted 20 years, ’til ‘33, the Silver subsidiary coinage, ~50 years, ’til ‘64, and any semblance of a ‘Gold Std.’ ’til ‘71..
here’s a quick overview of ‘Gold Std.’:
http://www.econlib.org/library/Enc/GoldStandard.html

But, back to the Q, LSS: it’d be a process, as well, to unwind the FedRes–if, in fact, it would be wholly necessary. The biggest problem it foists, along with its duopolistic partner, the USG, is lack of Choice. With it, there is One ‘legal tender’, with no, ready, competition.

To that end, ‘legal tender’ laws need to travel, one-way, as well, taxation on ‘currency transactions’ v. the U$D, should be on the same Coach..

w/this: “why others haven’t tried eliminating central banking if it is such a bad idea.” if you understand the spread of CB’ing, over time, you’ll see the answer–LSS: these catz shouldn’t be confused with Schoolmarms–see the problems that Jefferson, Jackson, and Garfield encountered, for starters…

and w/this: “Even China has one. Starting from where they were 30 years ago, they could have built any kind of system they wanted to.” no doubt that the PBOC is a ‘CB’, this: “they could have built any kind of system they wanted to.”(and acheived a similiar result…)–you should wonder about..

And, re: Infrastructure, see: “…the Texas Transportation Institute, a research arm of Texas A&M University, released its 2007 Urban Mobility Report on September 18, detailing how congestion on U.S. roads is getting worse. It’s a problem that forces Americans to spend 4.2 billion extra hours each year in their cars—approximately 38 extra hours for each urban driver—and wastes 2.9 billion gal (11 billion L) of fuel, at a total cost to the national economy of $78 billion.

As a result of these incidents and the Texas institute’s report, major news organizations began to discuss what was wrong with the nation’s infrastructure. The Minneapolis bridge collapse and the recurring problems for airline passengers, in particular, also led to a series of congressional hearings in the summer and autumn and briefly drew comments from several of the leading candidates in this year’s presidential election.

The mood of this debate was bleak from the outset, as evidenced by three sentiments, all expressed on August 5, less than a week after the I-35W collapse.

On that day, John McQuaid, a Pulitzer Prize–winning journalist recently with the Times-Picayune in New Orleans and now based in Washington, D.C., as a fellow with the Open Society Institute, wrote an op-ed piece (“The Can’t-Do Nation: Is America Losing Its Knack for Getting Big Things Done?”) for the Washington Post in which he stated that America is losing its reputation as a problem-solving nation—one that once constructed such great engineering projects as the Panama Canal and Hoover Dam—and instead has become a “can’t-do nation.” Pointing to the Minneapolis bridge disaster, the failure of the levees in New Orleans during Hurricane Katrina, and America’s current foreign policy troubles, McQuaid pondered the question, “has there ever been a period in our history when so many American plans and projects have, literally or figuratively, collapsed?”

As people were reading McQuaid’s piece, they could also find an editorial (“A Bridge Collapses”) that day in the New York Times warning that “the nation’s physical foundations seem to be crumbling beneath us.” The Minneapolis bridge, it said, the Manhattan steam pipe, and New Orleans’s “substandard levees . . . are some of the most dramatic signs of the nation’s failure to maintain and enhance its aging physical structures at a time when demands on roads, transit systems, sewage treatment plants, and other vital facilities are rising.””
http://pubs.asce.org/magazines/CEMag/2008/Issue_01-08/article1.htm

Longer Story Short: our ‘information economy’, our manufacturing of bits ‘n bytes, digi-dollars, and CGI, our ethereal commerce, needs a bedrock foundation from which it can be cantilevered..

We don’t have that, either..

OK, I’m reading.

But you haven’t answered my question as to why others haven’t tried eliminating central banking if it is such a bad idea. Even China has one. Starting from where they were 30 years ago, they could have built any kind of system they wanted to. So are they trying to emulate our success or our our failure?

The success I am talking about here is our standard of living, material possessions, brick and mortar, most of the greatest universities in the world, roads, bridges, infrastructure, winning WW2, being the only nation to have a put a man on the moon, outlasting the Soviet Union and winning the cold war, being the country most immigrants for the last maybe 100 years have wanted to come to – they came here because we were successful, the land of opportunity; people throughout the world admire America for our success. Do you think they are all wrong, that it has all been an illusion?

The successes I mentioned are real things; debt is just paper. It was created, and it can be destroyed as it currently happening, and will likely happen in the future, perhaps even at the US Treasury level. See: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFgHlh.Dn4Lc

And I am not saying central banking is inevitable; I don’t have the answers as you guys apparently do. I am merely asking questions, trying to learn. But if we dissolved the Fed tomorrow, what would happen to our economy? In our current situation that would seem to be a certain path to a disastrous depression. That is what I am saying now: Ben has no choice but to work within the system as it is. Or do you think now would be an appropriate time to let the current system collapse completely and begin a new one? Would the country even survive such a cataclysm?

And what evidence is there to show that free-market banking, or whatever it is called, is a better system in such an advanced, complex economy / world as ours?

OK, back to my reading, and thanks for the links, BTW, the first one is quite good so far.

But I fail to see how letting credit markets freeze up would have been a better idea in 1998 than it turned out to be in 2008.

It’s like repeatedly extinguishing small forest fires just lets the underbrush accumulate until you get a catastrophic fire. You’re saying the firefighters should have stood by and let the forest burn to the ground, and then market participants would have learned their lesson.

Clearly, the LTCM crisis showed that absolutely no one is willing to accept the consequences of a true laissez-faire approach, not even the Greenspans.

Therefore, your argument is just a straw man, and the only logical lesson to learn is that in exchange for government firefighting in times of stress, the markets need to accept sound ‘forest management’ practices; not let opaque, structurally unstable markets get so big they threaten the whole system, report risks transparently, and accept limitations on risk in exchange for government rescue in times of stress.

I shudder to think of what sort of mutated monster Bernanke and Paulson have created now.