The Federal Reserve should be abolished.

Thx to my OPP for this debate and thx to our audience for reviewing it.......... The primary motivation for creating the Federal Reserve System was to address banking panics. Other purposes are stated in the Federal Reserve Act( http://en.wikipedia.org... ), such as "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes". Before the founding of the Federal Reserve, the United States underwent several financial crises. A particularly severe crisis in 1907 led Congress to enact the Federal Reserve Act in 1913. Today the Federal Reserve System has broader responsibilities than only ensuring the stability of the financial system. Current functions of the Federal Reserve System include: (1)To address the problem of banking panics (2)To serve as the central bank for the United States (3)To strike a balance between private interests of banks and the centralized responsibility of government To supervise and regulate banking institutions (4)To protect the credit rights of consumers (5)To manage the nation's money supply through monetary policy to achieve the sometimes-conflicting goals of (6)maximum employment (7)stable prices, including prevention of either inflation or deflation (8)moderate long-term interest rates (9)To maintain the stability of the financial system and contain systemic risk in financial markets (10)To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system (11) To facilitate the exchange of payments among regions (12)To respond to local liquidity needs (13)To strengthen U.S. standing in the world economy http://en.wikipedia.org... Why do we need the Fed ?: In order to understand why we need the FED we need to know what it was like before the FED was created. Before the FED was created in 1913 there were more than 30,000 different currencies floating around in the U.S. Currency could be issued by almost anyone even drug stores were known to issue their own notes. There were many problems that stemmed from this, including the fact that some currencies were worth more than others. Some currencies were backed by silver or gold, and others by government bonds. There were even times when banks didn't have enough money to honor withdrawals by customers. Imagine going to the bank to withdraw money from your savings account and being told you couldn't because they didn't have your money. Before the FED was created, banks were collapsing and the economy swung wildly from one extreme to the next. The faith Americans had in the banking system was not very strong. This is why the FED was created. The FED's original job was to organize, standardize and stabilize the monetary system in the U.S. It had to set up a method that could create "liquidity" in the money supply in other words make sure banks could honor withdrawals for customers. It also needed to come up with a way to create an "elastic currency," meaning it had to control inflation by making sure prices didn't climb too quickly, and it needed a way of increasing or decreasing the country's supply of currency in order to prevent inflation and recession. Inflation: Inflation http://static.ddmcdn.com... Inflation is not a good thing because it slows down economic growth. For example, when inflation is high, things cost more and people spend less. They also do less long term planning that involves spending money, such as building houses and investing. Businesses are affected in the same ways. When inflation is high, it tends to fluctuate quite a bit. This uncertainty makes people wary of spending money for fear that inflation will increase even more and they won't be able to pay their bills. High inflation also adds additional costs to long-term interest rates. These costs are to offset the risk associated with inflation. The additional costs make borrowing money less attractive. When people don't buy things (when demand is down), then the supply of goods gets too high, production has to decrease, and unemployment increases in other words, recession hits. http://static.ddmcdn.com... When prices are stable when inflation is low, consumers make more purchases, investments, etc., production output is maintained and employment remains high. Fed Tasks: Monetary Policy http://static.ddmcdn.com... Monetary policy refers to the actions the FED takes to influence financial conditions in order to achieve its goals. The FED's primary control is in the raising and lowering of short term interest rates. In doing this, the FED can indirectly influence demand, which then influences the economy. For example, if interest rates are lowered, borrowing money to make purchases becomes less expensive, and people are more motivated to spend money because they can get a better deal on the loan. Spending money, in turn, stimulates economic growth, which is what the Fed is trying to do in that instance. If there is too much money in the economy, however, people spend more money and demand increases at a faster rate than supply can match. Prices rise too quickly because of the shortage of products, and inflation results. If there is too little money in the economy, people don't have excess spending money, and there is little economic growth. The Fed watches economic indicators closely to determine in which the direction the economy is going. By forecasting increases in inflation or slow-downs in the economy, the Fed knows whether to increase or decrease the supply of money. Influencing inflation takes a long time and has to be looked at as a long-term goal. Influencing employment and output, however, can be done more quickly and therefore is a short-term goal. Finding the balance between the two is key. The lags in the effects that monetary policy has on the economy are significant. This is why the FED has to make forecasts of inflation prior to it actually happening one, two or even three years in advance. If the FED waited until inflation were apparent, then it would be extremely difficult to catch up and get it back under control. I will explain the economic indicators in later rounds (8,000 characters not enough to do so) . Gold standard: Most alternatives to the FED are variations of gold standard systems. But they didn't work before, won't work now. The strength of a gold standard is its greatest weakness too because the money supply is determined by the supply of gold, it cannot be adjusted in response to changing economic conditions. If not perfectly credible, a gold standard is subject to speculative attack and ultimate collapse as people try to exchange paper money for gold. There is not enough gold to redeem dollars. Let's assume we are on the gold standard and China one day wanted to cash in all the debt the U.S. owes in gold bullion deposits and have very little left over if any. Until my OPP makes a educated argument with an alternative to the FED there is no debate because it is simply impossible to abolish the FED.