The Federal Reserve System (Fed), a creature of the Progressive Era no less, enjoys wide support within the conservative movement these days. It's strange.
Though most mainstream conservatives frown upon the welfare state and are generally suspicious of technocratic rule, any discussion of the unelected central planning bureaucracy otherwise known as the Fed, which is the most powerful of them all, is strictly limited to policy prescriptions. Fundamental questions such as why a free society requires the "Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly" in the first place, and why the Fed can be trusted with such immense power, are categorically off the table.
In fact it's crazy to question the Fed!
Far from being skeptical of a handful of technocrats who claim to possess the requisite knowledge to plan the monetary affairs of literally hundreds of millions of people, mainstream conservative pundits twist themselves in knots in support of the Fed, even attributing "conservative principles" to its Magic Money Printing Machine. Huh?
The mainstream right loves to disparage critics of the Fed too. End the Fed? A free market monetary system? Why, that's crazy! Take, for instance, this derogatory, innuendo and conspiracy-laced piece from Red State, "Time To Take Away Those Committee Assignments."
This subcommittee hearing is a great example of [Rep. Ron Paul's] inappropriate oddness. With all that government needs to do, and all that it needs to stop doing, the last thing we need is a series of hearings on how the Federal Reserve is causing massive unemployment.
Yeah, that's it. After creating the artificial boom that led to our current unemployment crisis, while giving away trillions of dollars in free money, "the last thing we need" is to question the Fed. As Paul says regarding the "dual mandate":
The only success the Fed has had in maintaining full employment has been on Wall Street where it props up crony banks and investment houses to prevent them from going bankrupt as they should. Instead, they survive to malinvest another day while their executives enjoy jackpot bonuses.
Auditing the Fed wasn't exactly popular with the mainstream conservative crowd either. Sure, it got some support. But it was never a priority. The National Review even found it necessary to scold the "populists" who want "to go mucking about with the central bank," reminding one and all of Bernanke's "clear thinking." Um, clear thinking? For the record, Ben Bernanke has always and everywhere been wrong about everything.
Anyway, it turns out the (watered-down) audit was fruitful after all.
Bloomberg News published a story that confirmed the worst suspicions of bailout critics … mak[ing] it clear, three years afterward, that the infamous Troubled Asset Relief Program (TARP), which divided the country and ignited at least one mass protest movement (if not two), was never more than a sideshow when compared to the bailouts authorized by the Fed.
In light of all that we've learned since the financial crisis, though, it seems obvious that the public was poorly served by legislators knowing none of the information available to the bank CEOs lobbying them when the regulation of the financial sector was under review. The lesson contained in the Bloomberg story is that the sooner and more fully the activities of the Fed are disclosed to the public, the better.
In other words, the news that the Fed kept significant, economy-altering bailouts secret largely vindicates the much-derided outsider efforts to audit the Fed.
Yep. Blame Obama, blame somebody, blame anyone … but "the last thing we need" is to look behind the curtain. That's crazy!
- Where'd the Bailout Money Go? Shhhh, It's a Secret
- Federal Reserve Documents Reveal Massive Foreign Bank Bailouts
- Libya-Owned Arab Banking Corp. Drew at Least $5 Billion From Fed in Crisis
- Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed To The Too Big To Fail Banks?
- The Looting Of America: The Federal Reserve Made $16 Trillion In Secret Loans To Their Bankster Friends And The Media Is Ignoring The Eye-Popping Corruption That Has Been Uncovered
- US Fed lent $3.3tn to multinationals, billionaires and foreign banks
- The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went
Why does the Federal Reserve demand control of money?
In testimony a couple of weeks ago, Ron Paul ripped "the Ben Bernank" a new one, beginning by asking if he did his own grocery shopping. The point being rising food costs. "This argument of prices going up two percent, nobody believes it," continued Paul. "The old CPI says prices are going up at nine percent. People on fixed incomes, they are really hurting. The middle class is really hurting. Because their inflation rate is very much higher than the government tries to tell them, and that's why they lose trust in government."
"That inflation is taking money away from the people … Someone is stealing wealth and this is very upsetting."
What's that you say, crazy? There's no way the Fed is going to self-destruct? Think again. Here's what senior fellow in economic history at the Council on Foreign Relations, Amity Shlaes, has to say about inflation and the consequent destruction of the dollar.
The Fed chairman recently described the prospects for price increases across the board as "subdued."
"Sudden" is more like it. The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You're gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn't know it.
"Sudden" has happened to us before. In World War I, an early version of what we would call the CPI-U, the consumer price index for urban areas, went from 1 percent for 1915 to 7 percent in 1916 to 17 percent in 1917. To returning vets, that felt awful sudden.
How did it happen? The Treasury spent like crazy on the war, creating money to pay for it, then pretended that its spending was offset by complex Liberty Bond sales and admonishments to citizens that they save more.
History has other examples. In 1945, all seemed well: Inflation was 2 percent, at least officially. Within two years that level hit 14 percent.
All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974, and stayed high for the rest of the decade, diminishing the quality of life for whole cohorts. They paid the higher interest rates needed to reduce the inflation, and got a house with one less bedroom.
The thing about inflation is that it accelerates. The acceleration hit storybook levels in the most sudden case of all, that of Germany in 1922. Many financial analysts thought the Weimar authorities weren't producing enough money.
"Tight Money in German Market: Causes of the Abnormally Rapid Currency Deflation at Year-End," read a New York Times headline. The Germans didn't know it, but they had already turned their money into wallpaper; the next year would see hyperinflation, when inflation races ahead at more than 50 percent a month. It moved so fast that prices changed in a single hour. Yet even as it did so, the country's financial authorities failed to see inflation. They thought they were witnessing increased demand for money.
The greater the denial before, the faster the inflation accelerates after.
We can debate whether today's challenge resembles that faced in the early 1980s, or something worse. But one thing is clear: pretty soon, we'll all be in deep water.
And, boy oh boy, is the Fed in denial.
In the meantime …
- Savings low, worry high among workers
- US Treasuries sell-off gathering pace
- Citibank, 3 others fail Fed stress test
Could someone tell me again why, exactly, it's crazy to question the Fed? I mean, how on earth could any conservative worth his salt support an unelected central-planning monstrosity like the Fed? What's so conservative about that?
But, but … what would we replace it with?
I'll let economist and Senior Fellow on Public Policy at Stanford University's Hoover Institution, Thomas Sowell, answer that question for you: "When someone removes a cancer, what do you replace it with?"
Last but not least, it is imperative to understand how liberty and monetary policy are linked. "Quantitative easing" and other "easy money" policies erode the value of the dollar, discourage savings, depress retiree incomes, and impoverish the lower and middle classes, all of which necessarily lead to increased government dependence.
Why does the Federal Reserve demand control of money?