The United States Should Abolish the Federal Reserve

Gold standard-GS1 Here, Pro responds to the 2 recessions I brought up (early 80s and 90s). He essentially blames the Fed for causing them, but I’ll prove why this extremely misleading, and even if it is true, why it’s insignificant, on balance. Starting off with the 80s Recession, Pro says that the Fed pumping money into the economy is what eventually caused the “bubble” to burst. He doesn’t actually provide any evidence, beyond a quote from my source, which stated: “Between 80' and 82' the U.S. economy experienced a deep recession,the primary cause of which was the disinflationary monetary policy adopted by the Federal Reserve.” If you reread my whole argument I very clearly did admit that was the main reason for the recession. However, one might say the Fed caused the inflation in the first place. I’ll admit right now the Fed was partly at fault for the inflation, but I’d like to also say that there is no way that could ever happen again. Why is there no chance that could happen again? Because the Fed was still using simple Keynesian models created in the 30s, which have since been improved specifically the Phillips Curve; so the great inflation of the 70s couldn’t occur again. (1) Simply, the Phillips Curve stated that as unemployment decreases, inflation naturally increases. (2) However, in the 70s that was disproved through evidence as the US experienced rapidly increasing inflation, with increasing unemployment. When you also factor in the oil crisis that occurred during the 70s, which quadrupled the price of gas (a commodity which everyone who had a car purchased) (3) Plus high levels of gov't spending early on in Vietnam also put pressure on the economy. (3) By the time the 80s came, the Fed finally countered the inflation and laid the foundation for what was at the time, the greatest period of US economic growth in history. As for the 90s Recession, perhaps rates were too low for too long. Although one cannot deny foreign implications such as, the Gulf War and increases in gas prices or other factors the Fed doesn’t control such as taxes being raised would be a major factor as well. (4) However, looking at a little perspective, between the years of 80-00, the US was in recession for 6 of them. The other 14 years were spent in some of the most successful periods of American economic growth. If a minor recession, which perhaps could have been avoided if not for war, rising gas prices, and tax increases is the cost for US’s most successful period of economic growth any sane person would take that. Especially when you look at what happened without a Central Bank (I address in my defense of A3). Pro made no effort to deny dropping the rates helped the economy grow in the 90s, because it’s undeniable. Pro is choosing to focus on the bad, despite the fact the good greatly outweigh the bad in the case of the 80s/90s economies. 2 For his rebuttal here Pro simply chooses to ignore any evidence I provided to the contrary and just talk in abstract terms. Restating what I said from the first round, “lowering the rates is done to bring growth into a sluggish economy”. It’s that simple. If there is a lack of spending in the economy (stock market, products, etc.) low rates will give incentive towards that. As mentioned in my opening arguments that’s what occured in the 80s and 90s, the facts are there. Pro made no efforts to address those directly, instead focussing on the minor recessions preceding them and talking about theory with no evidence. Pro also didn’t address the fact I brought up that countries without a gold standard were hit a lot less severe by the Depression, since their central banks could do more to revive their economies (more on that in argument 4). Silence is concession, so Pro accepts that banks need to be able to drop the rates. It’s obvious that if rates are held low for too long then bubble will form. However, the Fed also has the ability to raise the rates too. Like I showed in the opening arguments about the late 90s, early 00s. The Fed cushioned the fall and would have completely avoided recession, if not for the 9/11. Pro dropped this argument, and therefore conceded to it. 4 Voters, this whole argument/contention must be ignored and Pro should be stripped of his conduct point, here’s why: By accepting this debate, Pro accepted that the last round round was for rebuttals only. However, Pro claims I made “the assertion that there is consensus on the cause of the Great Depression.” I never once did this. What I said, was the GS made it impossible for central banks to respond to the Depression. Now I did call it a deflationary period (which he wasn't suppose to respond to anyways), but I did not once address the cause of it. Pro also mentions the end of the Depression. I didn’t address that either. Since Pro is introducing an argument in a round meant for rebuttals and lying, I urge voters to give Con conduct and ignore this argument.This also means since the next round is only for defense, he cannot attack my opening arguments again so he has accepted that the Fed’s inability to drop the rates if needed makes situation’s worse stands and Pro conceded this point. This concession means Pro admits that if the Fed cannot drop the rates, recessions will be worse and more brutal than they otherwise would have been. 5 Pro responds to a claim I never directly made about the burst of the Housing Bubble, by primarily using red herrings. Pro begins making a useless comment mentioning that the OCC regulates banks. Just because the OCC regulates banks, doesn’t mean other places shouldn’t as well. In fact, Pro’s source directly mentions that the Fed regulates banks as well. As for it not being the job of the Fed, you can go right to their website where it says some of the roles of the Fed are to supervise and regulate the banking and financial systems, as well as maintain the stability of the financial system due to the risk factor. (5) Therefore, it is the Fed’s role to regulate banks as well. I already accepted that interest rates were perhaps too low for the 00s (I don't have to defend everything). However, it’s also ridiculous to assume that if stress tests were being ran, the crisis would have been as severe. This is where he relies completely on a red herring. He doesn’t attack any of my claims about the importance of stress tests. All he says is that low rates helped fuel the Bubble. Pro inserts this quote into his argument, “Low rates created an incentive...to hunt for riskier assets”. The problem lies in the foundation that banks were able to do this. Pro accepts that risky assets were a huge part of causing the Bubble, but fails to make the connection that stress tests could help prevent this from happening. If banks risk being shutdown for hunting risky assets, they will be a lot more careful. This is part of what stress tests examine. (6) As mentioned with my example in Canada last round, none of their banks failed, because their banks were being much better regulated by their central bank than US banks were. (7) Finally, Pro says banks were being regulated more throughout the 00s. Once again, this is a red herring. Pro still fails to address the importance of stress tests, which was my argument. Not all regulations are equal, if the proper regulations aren’t being pursued then it doesn’t matter how much regulations there are. Pro ignoring the core of this argument should be enough to win me the debate. Pro did not adequately disprove the need for stress tests (and if anything helped prove why they’re needed), which is one of the Fed’s role, meaning he did not prove that the Fed should be abolished. 3 I’ll address the recessions Pro brought up, but the history of no central bank has been much worse in the US, so if we use apply Pro’s logic here, we can therefore see a central bank is preferred. As mentioned last round in the 77 years before the end of the 2nd Bank of the United States and the creation of the Fed, there were 8 banking crises. There have only been 3 since the Fed was created, which has been around for 102 years, meaning a banking crisis is a lot less likely under the Fed. (8) As for recessions, Pro lists 18 recessions over the 102 year period since the Fed’s been created. Adding the duration, there have been 19 years and 10 months under recession since the Fed’s creation. (9) Meanwhile, in the 77 years without a central bank there were 20 recessions, which when adding duration, led to approximately 37 years and 2 months under recession. (9) That’s almost double amount the years affected by recession in the Free Banking Era compared to the Fed era! To put it another way, about 48% of the time during the Free Banking Era, the country was in recession, compared to just about 19% of the years under the Fed being in recession. Also, the average recession in the Free Banking Era was about 1.9 years long, while the average post-Fed recession was about 1.1 years long, almost a year’s difference in length! (10) This should be enough to rebut Pro’s claim, since I used his logic, but I’ll address the recessions he mentioned too. Since Pro failed to rebut that the GS made it harder for the Fed to change the rates, you can eliminate any recessions that occurred before 1971 (the year the Us was pulled off it). Then as I explained, there were many international events and bad economics that existed in the 70s, so those recessions can be cut (plus the ones in the 80s responding to this). Plus, I mentioned the 01 recession wouldn’t have occurred if not for 9/11 (with no response from Pro). Finally, I showed how, the Great Recession, wouldn’t have been as severe if stress tests were being enacted on banks. For this reason, the Fed’s importance is undeniable. CPro failed to show that the Fed's ability to change rates is not in the best interest of the economy and failed to show that stress tests aren't good. I only need to prove 1 reason for the Fed not to be abolished to win as well, so vote Con.Shttp://goo.gl...