By the end of the day on November 9, we received the questions listed below. They were forwarded to the panel of judges with only the numbers assigned below to identify them so that the judges see only the list with numbers and have no information regarding the identity of the author of each question.
We are interested to know what you think of the questions so please leave your comments. If your comments do not show up right away, please be patient. We will be monitoring the comments to try to minimize vulgar, crude or otherwise unfortunate messages.
After the top ten questions are identified by the judges, we will post them here. The winner of the $1,000 prize will be announced at the November 19 program.
Here are the questions:
Question 1001
Recently, the Fed has released rules regarding the lowering of high overdraft fees by banks in order to aid consumers in this recession. Since this rule alone cannot carry us out of this time of hardship, what other types of policies might we see being passed in the future in order to help consumers keep money in their pockets and bank accounts?
Question 1002
As stated in “Modern Money Mechanics”, a Federal Reserve publication that outlines the fractional reserve banking system, “Of course, [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts…Reserves are unchanged by the loan transactions. But the deposit credits constitutes new additions to the total deposits of the banking system.” With that in mind, if money is created from debt, with the added interest, how can we ever pay back the interest that is owed to the banks, if there is only enough money in existence to cover for the initial loan amount?
Question 1003
The role of the Fed is to supervise and regulate banking as well as to maintain the stability of the financial system. Based on the events that have occurred in this past year, it has become obvious that the Fed has not fulfilled its obligations. How would you personally grade the Fed’s performance, and how should the Fed be held accountable for its actions?
Question 1004
President Obama has said that “he prefers a strong dollar.” However, with the current economic situation, that is not possible. Firstly, what are President Obama’s intentions? Secondly, is weakening the dollar a good option for the short run? If so, what would we be forced to do for the long run?
Question 1005
The important debate between economists seems to be the argument over what we should really fear: inflation or deflation. Fed Chairman Ben Bernanke has drastically lowered the Federal funds rate because it is his opinion that expansionary monetary policy will prevent depression by dampening deflation. Economists such as Paul Krugman agree arguing that coupling expansionary monetary and fiscal policy will prevent a liquidity trap, while others such as Martin Feldstein worry about the Fed’s ability to remove liquidity when the economy begins to recover; high inflation being the result. Mr. Epstein, was Fed expansionary monetary policy necessary to prevent deflation/depression and will the Fed be able to prevent extremely high inflation by reeling in liquidity?
Question 1006
Mr. Epstein, you have stated that, “There are three reasons to abolish the Fed: recession, inflation and war.” Recently, the U.S. has been caught up in both war and recession and may be poised for extreme inflation in years to come. The wars in Iraq and Afghanistan have been extremely costly to the U.S. tax payer. Additionally, the current recession is one of the worst the U.S. has ever seen. Given the severity of these issues, one would surmise that you are currently in favor of abolishing the Fed. Assuming this is true, what would be your proposed alternative to the current system and how would you go about unwinding the Federal Reserve without causing further damage to what currently is a fragile economy?
Question 1007
Given the severity of the current recession which was brought on by the credit crisis, the Fed was forced to take drastic measures resulting in the implementation of several new programs in an attempt to stabilize the economy. The Fed came to the rescue of several large investment banks. Both academics and practitioners have applauded the Fed for their actions. Many would agree that if it wasn’t for these drastic measures, the current recession could have been far worse and have lasted much longer. Do you think that the Fed’s actions over the past year were appropriate? If you were the Fed chairman, what would you have done differently?
Question 1008
The Fed under Alan Greenspan was a major proponent of laissez faire economics and deregulation. However, with the benefit of hindsight, many people today blame this deregulation for contributing to the recent financial crisis and recession. In a testimony to congress, Alan Greenspan himself stated that his views proved to be wrong and that his “premise that you can let the markets regulate themselves was misplaced.” As someone who supports the abolition of the Fed, why do you feel that further deregulation would be beneficial to economy of the United States and how would deregulation prevent a future crisis from occurring?
Question 1009
Prior to the addition of the $787 billion stimulus package, the $1.4 trillion fiscal year stimulus and the projected out-year deficits of $1.0 trillion for many years to come, it seemed that solving our accumulated fiscal problems (i.e., Medicare, Medicaid, Social Security, etc.) was almost insurmountable by itself. In your opinion, is it not reasonable to assume that our nation’s fiscal condition is now beyond political repair as a result of this additional spending and that we are likely headed for a substantial diminution in our quality of life and standard of living?
Question 1010
Could a central bank’s reduced ability to effect artificial stimulation through expanding the money supply be due to a growing body of circulated notes and the reduction in value of any one note thereof? In other words, does the rapidly reducing value of single notes in relation to a rapidly growing body of existing notes represent a lessening ability of central banks to effect artificial stimulation through expansion of the money supply?
Question 1011
Could an increasing level of inflation due to the Stimulus plan lead to an increase in the velocity of money, thereby compounding the rate at which prices rise?
Question 1012
As a higher level of domestic inflation typically leads to exports falling behind imports, is it possible that a higher level of inflation at home and the dollar loosing status as reserve currency could lead to a high degree of capital flight, compounding the problem?
Question 1013
In Murray Rothbard’s “The Case Against the Fed” he states, “But the Fed tries its best not to print cash but rather to “print” or create demand deposits, checking deposits, out of thin air, since its demand deposits constitute the reserves on top of which the commercial banks can pyramid a multiple creation of bank deposits, or ‘checkbook money.’” Does the Federal Reserve use this a cover-up for stealing money and if so can it be justified in any way?
Question 1014
As we all know that the Federal Reserve is completely out of control and the government has no intentions of examining its transactions will Ron Paul’s HR 1207 ever have the potential of getting passed? If so will the Federal Government be forced to take action when the truth is uncovered?
Question 1015
Is a fiat monetary system beneficial to modern society as globalization and capitalism has furthered us into this luxurious and technocratic lifestyle while a gold backed system may constrict our growth? Or does it hurt us because of the potentials of hyperinflation in a non-precious metal or commodity backed paper dollar system?
Question 1016
If Ron Paul’s proposed HR 1207 and S 604 bills come to a vote and the Fed is forced to be even more transparent, what will prevent the markets from reacting in a volatile fashion every time the Fed releases information?
Question 1017
According to statistic from the National Bureau of Economic Statistics the economy has spent only 21% of time in a recession, down from 47% from 1884 to the founding of the Fed in 1913. Isn’t this decreases in time spent in a recession an indicator of the success of the Fed?
Question 1018
If the Federal Reserve did not exist, who would have rescued the large firms, not including GM and Chrysler and brought the market back to stable conditions? Who is going to rescue banks whose failure could literally bring down the financial empire of the United States and the rest of the world?
Question 1019
According to Adam Smith’s free market principle, the economy will still make mistakes on its own because of the nature of the ‘invisible hand’. The fed was created based on the Keynsian principle, or government intervention, to speed up the free market principle (the purpose of the Fed). It is necessary to speed it up, because the free-market, although self-correcting, can take long amounts of time to fix itself. Without the Fed, won’t the economy just have prolonged periods of non-stability, eventually leading to an even worse financial situation?
Question 1020
If prices drop quickly because people don’t spend as much (like our current recession), do you think that the prices will go up just as quickly and, if so, would the fed encourage this and how? How would these rapid increases effect consumer spending?
Question 1021
Would you argue that recession, inflation, and war occur in cycles formed by the fed’s reactionary policy and that the abolishment of the fed would not remove these cycles but merely eliminate the enforcment of them through reactionary proceedures?
Question 1023
Does the fed actually enforce cycles of boom/bust (recession, inflation, and war) every 30 years (1890′s, 1920′s, 1950′s, 2000′s) rather than calm them? Can these cycles be benneficial?
Question 1024
One reason the Fed was created was to take the control of the currency supply out of the hands of big wigs on Wall Street. During a market panic in 1907, just before the Fed was created, the owner of J.P.Morgan served as the last resort lender to banks that were in trouble, and was able to buy up large majorities of stock in companies, even despite anti-trust laws that were in place at the time, because panic in the market caused government to allow it. Since a central bank was not in place to serve the purpose of last resort lender in times of trouble, a buyout by a wealthy corporation was the only option. If the fed were abolished, how could we ensure that exceeding power given to Wall Street wouldn’t lead to monopolization of ownership and power by big corporations?
Question 1025
It is generally believed that the free market is a self-correcting entity that constantly strives for a perfect balance in which complete efficiency exists. Throughout history, however, we have witnessed a series of bubbles and busts, so regularly that they have come to be expected. This makes it easy for one to wonder whether an unregulated market is in fact not striving for balance, but instead pushing from one extreme to the other, stretching profits, inflation, and cost control to such a brink that a strong recession and/or depression is inevitable. With the uncertainty that exists in the market, who is to say that without outside regulation by a financially educated agency such as the Fed, that corporations and the market would not push us into constant crises with their relentless strive for shareholder wealth maximization at the cost of steady inflation and access to capital by citizens?
Question 1026
If the Fed were to be abolished completely, giving complete control of the market to private organizations, how could we be sure to avoid corporate scams and greed that have run rampant in the past?
Question 1027
One of the most essential factors of economic growth and expansion is the money supply. An accurate measurement of circulated money helps greatly in forming a domestic policy of sorts. The Fed prints money, yet has difficulty tracking every dollar in circulation. Do you believe that with more control and oversight over the economy, the Federal Reserve would be able to track the monetary supply, thus creating a monetary policy?
Question 1028
The Federal Reserve has important obligations such as regulating the federal funds rate and enforcing the required reserve ratio. How can the private sector regulate their own lending if they are entirely self-interested?
Question 1029
One of the essential responsibilities of the Federal Reserve is to prevent asset bubbles and regulate lending. You yourself stated in an interview with the Ludwig von Mises Institute that, “If a recession needs to be permitted to run its course, most of what government does to spur an economy on during downturns can actually end up being counterproductive.” I am aware of the adjustable rate mortgages (ARMs) and their correlation to the Fed. Although the Federal Reserve may have contributed to the issue in some respects, the fundamental goals of the Federal Reserve are with the best intentions and in the best interest of the American taxpayers. Much of this recent economic recession was a result of the mortgage meltdown and the credit crisis, which were both fueled by predatory lending. Wouldn’t you agree that the Federal Reserve is more relevant and essential now, given the fact that the recession was driven mainly by the misconduct of the private sector?
Question 1030
In light of the recent economic meltdown, former Fed chairman Alan Greenspan admitted that his deregulatory policies, which agreed with the Friedman Doctrine and free market ideology, were flawed. In spite of this, economists following the Taylor Rule and similar schools of thought still want to curb the federal government’s discretionary fiscal policies. Your philosophy goes even further, demanding that the federal government’s regulations and fiscal policies completely cease. If the United States reduces or eliminates the Fed’s influence, then who should monitor financial institutions and their business practices?
Question 1031
Moving beyond the benefits and drawbacks of your political philosophy, it is a fact that few Americans are currently calling for the government’s complete withdrawal from the economy and a stop to its flow of money. How do you see your ideas entering the political system despite this opposition?
Question 1032
Business cycles can cause problems at both peaks and troughs: recessions lead to unemployment and lower standards of living while unchecked expansion beyond full employment triggers rapid demand-pull inflation. Theoretically, the government can act to dampen these negative effects. If we follow your philosophy and eliminate the government’s involvement in the economy, then is there any way to limit or prevent a capitalist business cycle’s meltdowns?
Question 1033
If the Federal Reserve is a private bank, then why does the President appoint the chairman of the Board of Governors? Why does the public not elect the Board of Governors and the chairman, especially since the chairmen is considered to be the second most powerful individual behind the President? The Federal Reserve has three main functions, one of which is to choose the best monetary policy for the United States. Since inflation is determined by monetary policy, should the Federal Reserve be responsible for our nation’s inflation rate and responsible for reporting it to the public? Why is the Federal Reserve not responsible for charting the monetary policy that lead to the recession?
Question 1034
I have paid great attention to current economic events, as well as the case for auditing, then subsequently abolishing, the Federal Reserve System. I have recently finished Congressman Ron Paul’s Revolution: A Manifesto, in which the controversiality of the Federal Reserve was discussed a great deal, advocating for its auditing. Supporters of such a move cite the current economic crisis as being orchestrated by the Fed itself, calling for privatization of banks. In response, critics, including Best-selling author John Mauldin, argue that eliminating the Fed would run the risk of the country spiraling into a long and devastating depression, possibly leading to unemployment percentages reaching 30%. This represents a valid fear. Is it possible that eliminating a national banking sytem would in turn lead to the return of the flawed and unreliable “wildcat” banks of the Andrew Jackson era, without some force to keep economic conditions in balance? Also, how would eliminating this balance, in both the short and long terms, impact the average American?
Question 1035
In the past year, the Federal Reserve has taken extraordinary measures to stimulate our economy from the problems caused by Fannie Mae, Freddie Mac and the Federal Reserve. However, these policies, such as lowering interest rates to zero, merely acted as a tourniquet to our shattered economy. How and when will the Federal Reserve unveil courses of action in order to stitch the wound of our recession? What lasting effects will it have on our economy? And what would the ramifications be, if any, of these actions?
Question 1036
If we were to abolish the Federal Reserve in the U.S., and it did have a positive influence on our economy, could this change pose a negative impact on the global economy scale for those countries that rely upon ours?
Question 1037
Economist Lawrence Parks claims that the real reason the Federal Reserve exists is that it simply prints more money to finance Congress’s policies, including wars. In fact, according to him, the Fed was created exclusively to finance World War I. Has the Fed, in your opinion, contributed anything to the financial system of the country, or has it simply been a money press for Congress as Mr. Parks would have us believe?
Question 1038
There are three reasons to strengthen the Fed: recession, inflation, and war. Recently, the Fed has failed to head off the repercussions from the Crash of 2008, despite that it cut the discount rate to virtually zero. We have been plunged into the worst economic downturn since the Great Depression. At the end of the 1970′s, it took strong Fed action by tightening the money supply to bring years of inflation under control. Necessary wars cause inflation, which must be managed by the Fed lest it get out of hand. Shouldn’t the Fed be strengthened to perform its valuable functions protecting the public against these economic dangers?
Question 1039
Many Congressmen and Senators have no formal training in economics and vote on fiscal policy based on instincts and judgments about the next year’s election. Doesn’t the Federal Reserve’s apolitical and professional nature as it directs monetary policy make it an excellent check and balance against the highly politicized and unprofessional nature of Congress’s fiscal policy?
Question 1040
I agree that perhaps housing and banking activities would function more efficiently if left to real market institutions, rather than to the Federal Reserve. But the Fed’s quick, and necessary, intervention on 9/11 (providing liquidity through its discount window and through open market operations) suggests that market forces might not be sufficient in staving off a financial crisis. Would real market institutions respond quickly enough at a time of catastrophe to warrant the abolition of the Fed?
Question 1041
In theory, banks are better able to get information about potential borrowers than are money markets, so banks should be less affected by information asymmetries. But since banks are also subject to costs and regulations, money markets can be more cost-effective in supplying short-term loans. Given the importance of money markets, then, it seems that abolishing the Fed would have detrimental effects on short-term lending. Isn’t the Federal Reserve, through its open market operations, crucial for keeping the market for Treasury securities liquid?
Question 1042
Since the Federal Reserve is largely insulated from political pressure, theoretically the Fed should act in the best interests of the country. Does this seem to be the case in practice?
Question 1043
The Fed is considered the source which manipulates the money supply and regulates the money in banks so they can lend out loands, which effectively increases investment spending, and in turn long run economic growth. If the Fed were to be abolished, what would be the source that would then manipulate the money supply within banks, and what other stimuluses would perpetuate long term economic growth?
Question 1044
The Federal Reserve Bank’s most basic purpose is to protect the American Economy. As our Nation’s Central Bank it wields a great deal of power over America’s Banking System and Economic Policy. However, globalization and increased American participation in the World Economy have left us susceptible to foreign influences that the Fed cannot control. Has the fed become more important now that the American economy is becoming increasingly vulnerable within the world economy, or are it’s powers illusory; completely incapable of controlling the world economy, and thus obsolete?
Question 1045
Many believe the Federal Reserve Bank has the duty of decreasing the money supply during prosperous times, thus preventing over-lending, meanwhile increasing the money supply during recession and depression thus encouraging lending and restoring the flow of money. When the Fed makes use of this policy, thus going against the theory of free market supply and demand, is it artificially effecting the American Economy?
Is this system only a method of temporary resolution, meanwhile chronically deteriorating the legitimacy of the American Economy?
Question 1046
Thank you for taking the time to come and speak with us. I was a major player in the sub prime industry for most of the last decade, and now a political science major. In my time in this industry I witnessed many, at the time prudent practices, come back to haunt our industry. When looking back at our business, hindsight is always 20/20. In looking back at the creation of the Federal Reserve and using the same hindsight, I have to agree with your call for abolition of this institution. Not only is it a danger to our economy, I believe it is a danger to our democratic process. I am also a proponent of the fair tax (HR 25 & S 1025) and see how an overwhelmingly positive movement can fall on deaf ears and eyes clouded by the influence of lobbyists. So my question to you is three fold. Do you think the Federal Reserve can be dismantled despite what will amount to immense political pressure, what will the post FED economic landscape look like i.g. who will control inflation and deflation and normal economic policy currently controlled by the FED? And do you think a gold standard that is not supported by a global economy puts the US economy at a disadvantage?
