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The Fed - Independence, Yes; But Accountability And Limits?

Tyler Durden's picture




 

Via Peter Tchir of TF Market Advisors,

At this point it is clear that there is no single person in America, and possibly the planet who can influence markets as much as the Chairman of the Federal Reserve Board.  The president may have more overall power (possibly) but in terms of moving markets for weeks at a time, that power primarily belongs to Mr. Bernanke.  An unelected official with almost total control over the “board” he chairs.

Some have argued whether the Fed should even exist.  I won’t go that far (it is beyond my scope), and I even understand why the Fed needs some independence.  But I don’t understand why he isn’t accountable or why there aren’t limits.
 
The “Voting” Constraint

In theory the Fed has a board that votes.  In fact there are actually 2 boards.  The first is the Fed Board of Governors, which consists of 7 members (5 at the moment), appointed by the President and confirmed by the Senate for 14 year terms. The Board of Governors sets the discount rate and the reserve requirements. The second is the Federal Open Market Committee (FOMC), which consists of 12 members (10 at the moment), who are the 7 members of the Fed Board of Governors, the President of the Federal Reserve Bank of New York, and 4 other Presidents of the regional Federal Reserve Banks (on 1 year rotating basis). The Presidents of the other regional Federal Reserve Banks participate in the discussions but do not have a vote. Congress, effectively, no meaningful influence on the Fed since no appropriations come from Congress – Fed pays its bills from its own operations.  FOMC sets the open market operations policy including the target Fed Funds rate.

In theory, the Chairman has the same one vote as the other members of the boards, but never in the history of the Fed has the chairman been on the losing side of the vote.  In fact, multiple dissents are rare.  The chairman may have the same vote but it is clear he is the leader.  Whether the other board members are meant to be independent, there is a clear chain of command, and they are effectively subordinate to him regardless of what was intended.  If the President of the United States wanted to call a board member directly, we have no doubt that it would be okay.  If a board member called the President directly, I expect there would be repercussions.  Only the chairman holds the post announcement press conference.  He has the 60 minutes interviews.  Whatever the intention was, it is impossible to argue that in practice the Fed Chairman is the boss of the others, and the idea of “team” is more reminiscent of the baseball bat scene in the “Untouchables” than a meeting of peers.
 
“Need To Know”

Why is there such a “need to know” level of secrecy surrounding many of their policies.  The Government Accountability Office (GAO) does audit the Fed but its oversight of the Fed system is limited to areas outside of monetary policy. In fact, the “GAO can’t review most of the Fed’s monetary policy actions or decisions, including discount window lending (direct loans to financial institutions), open-market operations and any other transactions made under the direction of the Federal Open Market Committee. It also can’t look into the Fed’s transactions with foreign governments, foreign central banks and other international financing organizations.” Fed Audit

Is it really a state secret what price the Fed paid on treasuries during their open market operations?  Would it have been collapse of the Western hemisphere if which banks got loans was disclosed?  We have real state secrets.  Military secrets.  Secrets that are designed to protect us from real people.  The CIA and the Pentagon are able to operate with oversight committees.  Shouldn’t the Fed have to ask special permission to keep documents or activities sealed?  We have a need to know.  Sure, there are some things that shouldn’t be available to everyone.  It isn’t a black or white issue and we can argue over which side we err on, but there are procedures.  How can it possibly be up to the Fed to determine what level of disclosure is necessary?  How long should things be withheld.  We have far bigger state secrets (I’m sure) than that ABC bank was going to fail if they didn’t get money and XYZ bank took advantage of the programs to make a few extra billion.   Everything should be disclosed, it is our “fiat” money after all. 
 
Fed Ownership

The fact that the Fed is technically owned by the banks is also a bit weird.  Why is that necessary?  Is there any reason for it?  Does it really have no influence?
 
Fed As A Regulator

When was the last Fed Regulatory press conference held?  The NY Fed has articles in the NY times about their open market purchase group and the level of “ahem” sophistication.  How many regulators are there?  If we could calculate a ratio of derivative notional outstanding per regulators assigned, how hideous would that number be?  Don’t they have any responsibility for regulating?  Where is the accountability?  The banking system effectively collapsed under the existing regime’s watch, and the chairman and virtually every single board member is still there, or retired of their own volition.  How is that possible?  How can the NY Fed with all the banks still be there?  The California Fed head with all the mortgage fiascos? 
 
Which Fed member didn’t take the time to figure out why all the “risk” in his system was being pumped into AIG?

What is the Chicago member doing?  Almost 4 years after Bear Stearns and we have to go to a DTCC website to get any information on CDS notionals?  Where is clearing, let alone exchanges?

Why Not Have Limits?

Traders have limits.  It is a key part of the job.  You are expected to trade and make money but you need to know what your limits are.  These include what products you can commit to, notional limits, DV01 limits, etc.  They are meant to be large enough to handle the day to day business you run.  You can usually get limit increases from your direct supervisor who has his own limits to allocate. If an occasional exceptional opportunity comes up that tends to be a fairly easy process.  If you continually bump into your limits, you can ask for a bigger increase.  Once in awhile something rare happens and the limits have to be approved at a higher level.  That trader considers himself independent but is subject to limits.

Why can’t the Fed have certain limits, and beyond those, they have to go to Congress?  Say $1 trillion of balance sheet.  Is that normally enough? Sure.  Under most circumstances that would be enough.  The Fed would be independent though technically “limited”.  If they need more, and times like this may call for more, it should be approved by the people or the representatives of the people.  That isn’t too much too ask.  The Fed is not slave to congress in “normal” times, but neither do they have unlimited powers.
 
Accountability

Authority and Responsibility go hand in hand. One without the other invariably leads to disaster. That’s is why the US government is based on the principle of checks and balances. The President/Administrative branch cannot unilaterally make policy decisions except as has been authorized by the Constitution and Congress. To pass a Healthcare bill or change the tax structure, the President has to go to Congress and persuade/negotiate/compromise.  And the Congress holds the purse strings. Nor can the Congress do things unilaterally, the President must agree or the Congress must have the unity to override the veto. The Judicial Branch is independent of the President and Congress, but if the Congress/President can pass a law overriding the decision of the Supreme Court. The key is information and ability to make corrections. Checks and balances all the way.

Why is the Fed not subject to the same principles? Congress has no purse strings over the Fed; the President has no voice past the appointment (and given the 14 year terms that can be served once, that’s not much a lever).  The Fed doesn’t have to reveal what it has done, thus making it impossible to make corrections. The President can be impeached for  "treason, bribery, or other high crimes and misdemeanors."  So can other civil officers of the United States, including the Fed Chairman.  The Vice President can assume the office of the President, if the President is unable to discharge the powers and duties of the Presidency.  The Fed Chairman apparently could ride in a helicopter dropping $100,000 bills on the people “to further monetary policy” and it might be impossible to stop him or find out how much he is dropping and on whom. 

 

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Tue, 12/06/2011 - 12:18 | 1951027 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The Fed is unconstitutional!  It is run by a private clique of bankers!  It is a private, for profit "S" corporation!  The Directs profit directly (hence the name) and their bankers get bonuses from the loans made by the Federal Reserve. 

Tue, 12/06/2011 - 12:19 | 1951042 LeBalance
LeBalance's picture

let's dispense with the validity or applicability of that concept.

http://jim.com/treason.htm

Tue, 12/06/2011 - 12:20 | 1951055 Oh regional Indian
Oh regional Indian's picture

Teh Fed is simply the 4 or 5th charter of the infamous First American Bank from bank when. It took them a long time to get it all right.

I think it's coming demise is planned. It's work is almost done. And look at the thing, fortress.

ORI

of-un-polished-things

Tue, 12/06/2011 - 12:30 | 1951097 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The seed of the tree of knowlegde was planted long ago in the minds of men.  It went through many seperate times, some of radical science, some of art, and some of philosophy.  The most recent turn is a revolution of deceit; that money can actually grow on this tree.

The bankers have played the greatest con-game of all time:  They have tricked people into believing that money is beyond time.  They have taken Einstein's theory that time is relevant to the next level by creating money (by debt) at a moments notice without any work.  They have gotten rid of hard work, making themselves, once again, Kings of this Earth.

Before now they needed armies to protect their gates.  Now they use propoganda.  Propoganda by the Hegelian dialectic:  There are only two sides, two sides of the coin, and you must pick a side.  However, what they do not mention, is that there is ONLY ONE COIN.  You can take the whole coin for what it is.

This is like how we understand that there is no red party, no blue party, but one Royal Purple Party, and we do not want any part of it.  We want to be independant, we long to be free.

Take away the Fed, and you have taken away the greatest wall the oligarchs have.  Take back the money supply, and you have taken back your monetary freedom.  So do it.

BUY SILVER

Tue, 12/06/2011 - 15:14 | 1951693 TruthInSunshine
TruthInSunshine's picture

Aside from the constitutional question as to whether Congress can delegate its role of coining money to a surrogate such as the Federal Reserve, the practical issue is whether Americans have a more immediate means of petitioning government for redress in the event that the majority (or even a plurality of voters) is not in favor of circumstances brought about by whatever monetary policy vis-a-vis monetary policy are brought about.

If Congress is controlling the money supply directly, rather than the Federal Reserve, voters can resort to the democratic process and "vote out the bums" far sooner and with more directness than if "an independent body, sometimes claiming to be governmental, quasi-governmental, or non-governmental, depending on convenience of the moment (apparently), such as the Federal Reserve" is controlling the money supply directly. Whether voters do the right thing or not is part and parcel of whether one believes in democracy (either direct or more of a republic version) versus statism, and is willing to assume that risk rather than trade it for the risks inherent in usurping citizenry input/rights.

From a more general and philosophical perspective, having an unelected (although appointed by the POTUS and confirmed by the Senate) Federal Reserve Chairman (who can then vote with his co-members at the Fed to fill in the ranks of fellow regional Fed Member Seats), with such a collective, non-elected group being able to control something as fundamental to the U.S. economy as the money supply and interest rates, truly does grossly warp what appears to be the clear intent (based on a plain reading of the Constitution) of those who drafted our Constitution.

We, as a new nation, had just broken away from the British Crown, which itself was subject to the predilections and private interests of a private central bank (House of Red Shield), warping its economy and the general welfare of its citizenry for private, kleptocratic gain, when we drafted and enacted our Constitution.

But here is the real question that every American with a pulse need answer:

What good is a GUARANTEED Constitutional framework of law and government (i.e. NOT law  or rules or CONSTRAINTS on government as mandated by men) if any part of the Constitution providing said guarantee can be dismissed, thrown out, arbitrarily tossed, burned, ignored, abused to the point of meaninglessness?

Tue, 12/06/2011 - 16:03 | 1952213 mr_sandman
mr_sandman's picture

If the Constitution was in force, we would not be allowed to create currency in America, so the question of whether "a collective, non-elected group being able to control something as fundamental to the U.S. economy as the money supply and interest rates" is moot.  The constitution specifically bans Congress emitting bills of credit.  Any money they wanted to coin would first have to be created and transferred by someone else, meaning they're not in control of it.  They just define the 'weights and measures' of that gold and silver.

 

You mention that they can always "vote the bums" out if they print too much money.  That's a nice theory.  There's a problem with this though--it's never happened in history--ever, including in America under the Articles of Confederation.  The only time that this might have been somewhat true is with Volcker and Reagan vs. Carter, but that wasn't congressional control of the money supply.

 

Also, there's no such things as a republican democracy, but there is such a thing as a democratic republic.  The U.S. Constitution was explicitly designed to prevent democracy, which is why U.S. Senators were not directly elected.

Tue, 12/06/2011 - 16:08 | 1952250 akak
akak's picture

There is another term for those who are politically "independent" and unaccountable to the public: Dictator.

Tue, 12/06/2011 - 20:41 | 1953164 i-dog
i-dog's picture

There are no "guarantees" with political constructs. Each generation must defend (or reject) what the prior generation constructed. Franklin himself warned of this: "A republic ... if you can keep it".

Also, a historical correction: The House of Red Shield played no part in the creation of the United States or its Constitution (though the Jesuits did ... through Freemasonry).

The Bank of England had been chartered as a private bank 80 years prior to 1776 by William of Orange, and it wasn't until 22 years after 1776 that Nathan Rothschild, at age 21, set up in London and began his mission to take over the Bank of England.

Mayer Amschel Rothschild had neither money nor influence in 1776. Prior to 1789, he didn't even handle the Bills of Prince William of Hanau, let alone any other state business. Prior to 1794, he had less than an upper middle class income. But in 1795 his income doubled, and in 1796 it more than quadrupled again. Then, two years later in 1798, his son Nathan Rothschild set up in London with the capital equivalent of 100 upper middle class incomes. That is when the Rothschild dynasty actually began its inexorable march to untold wealth.

The Illuminati, on the other hand, was formed just 2 months before the Declaration of Independence ... by Jesuit Adam Weishaupt who, at the time, occupied the chair of Canon Law at the University of Ingolstadt - a Jesuit chair in staunchly Roman Catholic Bavaria. It was not until 6 years later, in 1782, that the Illuminati began its takeover of Freemasonry - at the Masonic Conference of Wilhelmsbad, held in a castle owned by Prince William of Hanau. By 1789, the Illuminati controlled Freemasonry throughout Europe.

Incidentally, it was Prince William of Hanau's father, Roman Catholic Frederic II of Hesse-Kassel, who rented Hessian soldiers to George III to fight the Americans in the Revolutionary War of 1775-1783.

Tue, 12/06/2011 - 12:23 | 1951064 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Whatever....

Then it is just stupid and masochistic to want to be enslaved by a ruling oligarchy that makes decisions based on their best interests.  If you don't believe that the constitution is adaquate then that is motive to start a revolution.  If you do believe that the constitution is formal law, then the fact that it is being disregarded is a cause for revolution.  The only reason people have for not making one last stand for freedom is if they love being a docile, masochistic servant of the monopoly powers that the Federal Resrve control by their issuance of the money supply, based on their need to maintain the status quo, which is a prison system of epic proportions. 

Tue, 12/06/2011 - 13:25 | 1951321 JR
JR's picture

Powerful arguments all around, LH. Markets are no longer driven by economic developments but rather clandestine cash injections.  It seems kind of simple -- the people have less money, the market is flush.  Where did the market get its transfusions? 

All Americans are better off with a sound currency; they need to jettison the current system which benefits the Fed and its banking cartel.

Tue, 12/06/2011 - 13:36 | 1951365 tempo
tempo's picture

Uncle Ben is unaccountable because the elite, super rich families want it that way. The USA fights endless wars based on flimsy excuses (9/11 airplanes could have been shot down if Chenny had not been in charge of air defenses on that day) because its a easy was for the billionaires to become trillionaires. Clinton was paid $50,000 per month to do PR for Corzine is another example of the corrupt system. However, its probably no worse than the past 200 years of Government. He who has the gold makes the rules.

Tue, 12/06/2011 - 13:59 | 1951511 Stax Edwards
Stax Edwards's picture

The FED's profits are turned over to the treasury, not divied up among member banks.

Tue, 12/06/2011 - 14:13 | 1951600 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The Fed made, what, $10 billion last year?

The banks profit directly off of the actions of the Fed, and the Fed only turns over a few billion dollars.  The difference is in the hundreds of billions of dollars between what the Major Banking Houses make and what the Fed turns back to the Treasurie.

Tue, 12/06/2011 - 12:18 | 1951039 tmosley
tmosley's picture

Yeah, they are WAAAAYYYYY low.

Tue, 12/06/2011 - 12:27 | 1951086 lolmao500
lolmao500's picture

Last time I saw the numbers from Bloomberg, it was over 30 trillion... and that was like a year or two ago... so YEAH....

Tue, 12/06/2011 - 12:18 | 1951032 LeBalance
LeBalance's picture

Bee-man: "I have the *power.*"

Tue, 12/06/2011 - 12:22 | 1951060 old naughty
old naughty's picture

No only he has the *power**, he also has robots from Mars operating faster-than-light-speed algorithm.

Tue, 12/06/2011 - 12:20 | 1951048 Captain Kink
Captain Kink's picture

Is that Vodka that Geithner is guzzling?  Or perhaps Schnapps?

Tue, 12/06/2011 - 12:20 | 1951054 RobotTrader
RobotTrader's picture

The Fed will never be "abolished"

Not after pulling off one of the greatest financial miracles in financial history:

1) Plunging interest rates to 50-year lows while running insane deficits

2) Goosing stocks up 84% despite the worst economy in a generation

3) Allowing millions of homeowners to live "rent free" for 3 years, spurring the greatest consumer spending frenzy in 10 years.

4) Pulling all of this off, and have absolutely no inflation whatsoever

Tue, 12/06/2011 - 12:31 | 1951065 SeverinSlade
SeverinSlade's picture

Correction:

MINIMAL domestic inflation...Thanks to the USD being the world reserve currency, we've happily exported our inflation to China and other nations.

Make no mistake though, that inflation will eventually come home. 

Tue, 12/06/2011 - 12:24 | 1951069 old naughty
old naughty's picture

Robot, are you looking for these: ++++? There.

Tue, 12/06/2011 - 13:47 | 1951434 Bansters-in-my-...
Bansters-in-my- feces's picture

NO inflation,eh,RobotTrader...?

"Pulling all this off,and have absolutely no inflation whatsoever"

You FuckTard

Wipe the Bernank's keynesian cum off your face,we know you would give him an ass wash with your tounge,but thats in private.

This cum thing on your face,in public,is just a bit much.

Go wash up now,before more people have to see you like this.

Fool.

Tue, 12/06/2011 - 14:02 | 1951531 TheFourthStooge-ing
TheFourthStooge-ing's picture

He's been huffing gasoline with freddie.

 

Tue, 12/06/2011 - 14:11 | 1951596 Stax Edwards
Stax Edwards's picture

You forgot:

5) Looking the other way while their member banks blew up the world financial system merely to pad their year end bonuses.

6) Bailing out the banks that caused the mess, not even bothering to claw back any of the fraudulently earned bonus money.

7) Simultaneously watching the middle class who believed in the system get decimated, lose their homes, and wind up on foodstamps while living out of their cars, parents houses, etc.

8) Causing widespread inflation in all needs while touting bogus measures of such by excluding or reducing the weight of the most inflated items, to make themselves appear much more effective.

I could go on...

Tue, 12/06/2011 - 12:21 | 1951057 CvlDobd
CvlDobd's picture

Limits in government? Interesting idea. This just may be what we need to stop the debt growth.

Had anyone considered a debt ceiling to prevent over spending? I think thi is a good idea.

Tue, 12/06/2011 - 12:22 | 1951062 Robslob
Robslob's picture

 

 

The Fed is like the Board of any failed company...always the last to know...

 

Once banks have set their table THEN they tell the Fed "OMG...we just came across this huge problem and you have to fix it!".

 

Why else would they pick "academics" to run the money printing business...I mean really...how smart you got to be to just print money?

 

Tue, 12/06/2011 - 12:27 | 1951085 SeverinSlade
SeverinSlade's picture

You need PhD economists because it takes "economic geniuses" to attempt to centrally plan economic and monetary policies.  The alternative is a free market that governs itself which requires no PhD steering the ship.

Tue, 12/06/2011 - 12:27 | 1951083 Everybodys All ...
Everybodys All American's picture

The Fed out to save the world. Right. As if you should forget that they created all the "bubbles" and problems in housing and finance to begin with. We better put some limits on the Federal Reserve or otherwise we are heading for an IMF as the world's central bank with a one world currency and a one world government imo. Hope I'm wrong.

Tue, 12/06/2011 - 12:30 | 1951099 JustObserving
JustObserving's picture

"The Fed Chairman apparently could ride in a helicopter dropping $100,000 bills on the people “to further monetary policy” and it might be impossible to stop him or find out how much he is dropping and on whom. "

The Fed dropped $16.1 trillion during the last crisis and more than $3 trillion on foreign entities.  Can we find out how much of that money has been returned?  Apparently, not.

The Fed Chairman is far more powerful than the President and far less accountable.  If you are unhappy with the Fed handing out more than $3 trillion to foreign banks, there is nothing you can do.

Fiat money is a fraudulent game.  You have to embrace fraud to continue to play that game.  

One can expect a few trillion flowing to Europe soon - it's just electrons and required to keep the fiat game moving along anyway.

Tue, 12/06/2011 - 12:31 | 1951100 homer8043
homer8043's picture

I can't and won't go as far as many on this site calling for the end of the Fed and the fiat money system. The Gold Standard has many of the same issues as the Euro system with trade imbalances and lack of flexibility. Economies also benefit from having a central bank acting as a lender of last resort to get through TEMPORARY liquidity crises.

That being said, the current Fed has clearly gone rouge, and gone rouge a long time ago. The duty of the Fed or any central bank is not to save the economy from all pain and any recession at any cost. We've gotten here since we really didn't want to take our medicine from the internet bubble and that infrastructure over build, so we inflated the real estate bubble. Then we didn't take our medicine from the real estate bubble and that clear over build so we exacerbated a generational debt cycle that's ending any month now. All this while stealing from the middle class to enrich bankers and prop up the bottom quartile at barely subsistance levels.

Fed interest rate moves preventing any medicine taking from the late 90's forward has been rouge behavior. We'e now at the point that the consequences for further rogue behavior are exponential, not linear.

Tue, 12/06/2011 - 12:44 | 1951154 SeverinSlade
SeverinSlade's picture

"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson

Nothing wrong with a central bank in theory...So long as it is owned by the American people and not a private banking cartel.

Tue, 12/06/2011 - 12:49 | 1951173 homer8043
homer8043's picture

I have to give you that Jefferson sounds prophetic with that quote.

Tue, 12/06/2011 - 12:58 | 1951196 LawsofPhysics
LawsofPhysics's picture

How does any of this tie economics back into reality?  Still believe in infinite growth do you?  Good luck with that.

Tue, 12/06/2011 - 13:54 | 1951477 Antifederalist
Antifederalist's picture

Infinite growth, no. More efficiency, yes . There is a difference. Think about it.

Tue, 12/06/2011 - 18:03 | 1952833 r00t61
r00t61's picture

This is a great quote, but it's not from Jefferson.  "Deflation" as an economic term didn't come into use until the 1920s.  The first recorded instance of this quote is from 1935.

If you want an actual Jefferson quote about banking, I really like:

"I sincerely believe...that banking institutions are more dangerous than standing armies..."

Tue, 12/06/2011 - 13:58 | 1951501 Bansters-in-my-...
Bansters-in-my- feces's picture

Hey homer8043...

No matter what number you give yourself,your just another homer.

Tue, 12/06/2011 - 12:31 | 1951104 BennyBoy
BennyBoy's picture

The private bank known as the FED needs debt to increase by the govt and everyone else.

That's the FED business model.

It will go bust if few borrow from the banks.

Federal Reserve NOTES (Aren't notes debt?) are debt based money.

No debt, no money.

Tue, 12/06/2011 - 12:31 | 1951107 mick_richfield
mick_richfield's picture

Some have argued whether the Fed should even exist.  I won’t go that far (it is beyond my scope), and I even understand why the Fed needs some independence.

Then you need to extend your scope if you want to be relevant to the people of this country.

The Fed is illegal, unconstitutional, and treasonous.  They are undeclared agents of a foreign power.  It's 'independence' is blatantly undemocratic.  The destruction of the Fed and the arrest of its members will be the first step toward the restoration of the American republic.

 

Tue, 12/06/2011 - 12:36 | 1951123 Shizzmoney
Shizzmoney's picture

I always found it quite a bit of mockery that they put Andrew Jackson and Abraham Lincoln on Federal Reserve Notes, considering both tried to establish currencies AWAY from central banks (and both were shot at). 

Jackson himself often referred to them as "snakes in the grass" as well as his usual Jesus-filled rants on usury (which you won't hear today from hypcritical K-Street Republican assholes because the central banks and corporations line their pockets.

If jackson was alive today, he'd buy a shotgun and hunt Bernanke+Company down.  He was the Charlie Bronson of Anti-Central Banking freedom. 

Tue, 12/06/2011 - 13:20 | 1951291 Manthong
Manthong's picture

I never realized until recently that what is believed to be a tribute is in fact, a farce.

Tue, 12/06/2011 - 12:37 | 1951125 TheSilverJournal
TheSilverJournal's picture

Thanks to the Fed, the world has been brainwashed into thinking that inflation is the normal state of an economy, when in fact deflation is the normal state of an economy. The reason the US has experienced inflation over the last 100 years is because the Fed is printing money at a much faster rate than gold is being mined. In a normal economy, prices would fall as technological gains improve productivity, allowing the amount of goods to increase faster than the money supply. To simplify, with the same amount of gold chasing more goods, prices fall.


Tue, 12/06/2011 - 13:45 | 1951421 Antifederalist
Antifederalist's picture

Amen brother. Well said. Refreshing.

Tue, 12/06/2011 - 12:38 | 1951133 Snakeeyes
Snakeeyes's picture
"Timmy the Weasel" sidesteps question on Fed but admits the IMF (a subsidiary of the US Federal Government) will continue to fund European bailout. FED will bailout Europe, but hide the bailout like they did in 2008. S&P Places EFSF On CreditWatch Negative – EuroSov Reaction is “Meh.” Geithner Sidesteps The Fed Bailout Question, But Admits to Continuing IMF Bailouts

http://confoundedinterest.wordpress.com/

Tue, 12/06/2011 - 12:39 | 1951134 LongSoupLine
LongSoupLine's picture

 

 

The Fed Is simply the greed and power shadow policy of our govt's elected officials and their banking industry puppet masters.  It's a tangled, and multiple backdoor ridden web of utter corruption.

Until the perverse money-to-politics-and-policy-chain is broken by cultural shift, (only via revolution by the masses), nothing will change.

Period.

Tue, 12/06/2011 - 14:16 | 1951625 Stax Edwards
Stax Edwards's picture

Yup

Tue, 12/06/2011 - 12:41 | 1951138 SheepDog-One
SheepDog-One's picture

End the Central Bank that the Founders warned would be far more dangerous than any standing army...all spending must be done by 3/4th congress approval, and any congressman found taking bribes from bankers is immediately arrested and tried for treason...all politicians pay from city council to US president comes only upon certified budget surpluses, and maximum terms for all politicians is 4 years then you have to go back to the private sector.

Tue, 12/06/2011 - 13:57 | 1951493 francis_sawyer
francis_sawyer's picture

all politicians pay from city council to US president comes only upon certified budget surpluses

Great... I'm going to get elected to office, then immediately triple everybody's taxes and do nothing with the revenue except INWEST it with RoboTrader & some high rolling hedgies (to max my pay before they kick me out after 4 years where I go to work for the other side)...

I can't wait until 'Government 2.0' starts... Count me in...

Tue, 12/06/2011 - 12:42 | 1951142 YesWeKahn
YesWeKahn's picture

You want hold someone with unliminited resources accountable? They never count or account.

Tue, 12/06/2011 - 12:50 | 1951160 i-dog
i-dog's picture

Accountability? LOL ... what a quaint concept! 

The globalist system, of which the Fed is one integral part, does not function with any accountability to those below in the hierarchy ... only obedience to those above in the hierarchy.

Tue, 12/06/2011 - 12:48 | 1951169 LongBallsShortBrains
LongBallsShortBrains's picture

Off topic

New Ron Paul ad rocks!!!!!

http://reason.com/blog/2011/12/06/new-ron-paul-ad-takes-it-to-the-extreme

Go Ronny!!!!!!!!!

Tue, 12/06/2011 - 13:04 | 1951226 Bansters-in-my-...
Bansters-in-my- feces's picture

"The fact that the Fed is technically owned by the banks is also a bit weird".

Gee ya figure...

Underststement of the year.

Thats just some of that elite "fairness" going around.

Tue, 12/06/2011 - 13:10 | 1951250 loveyajimbo
loveyajimbo's picture

End the Fed by transferring all functions to treasury... BUT... first fire Geithner the queer and put him in prison (replace with Grant), and first, elect Ron Paul, and first, allow gold and silver to circulate as money, and first imprison Cheney, the evil bastard, and then... wait, I have to take a dump, be back in a minute...

Tue, 12/06/2011 - 13:16 | 1951269 JR
JR's picture

The way Ron Paul puts it is that “a government monopoly on the issuance of money is purely a method of central control over the economy.”

Paul has noted that “confidence in the dollar is plummeting, confidence in the euro has been shattered by the European bond crisis, and beleaguered consumers and investors are slowly but surely awakening to the fact that government-issued currencies do not hold their value.”

Warns Paul, “If you can be forced to accept the government’s increasingly devalued dollar, there is no limit to how far the government will go to debauch the currency. Anyone who attempts to create a market based currency – meaning a currency with real value as determined by markets – threatens to embarrass the federal government and expose the folly of our fiat monetary system. So the government destroys competition through its usual tools of arrest, confiscation, and incarceration.” (And let's not forget war.)

G. Edward Griffin warned long ago that ‘the Federal Reserve can now inflate our money supply by using literally any debt in the world…and unless we zero in on the Fed itself, we will just be playing political games with no chance of winning.” 

“There can be no more iniquitous alliance than to have the politicians at the service of the bankers, unless perhaps it is to have the military at the service of the bankers too.” – London Banker

Tue, 12/06/2011 - 13:16 | 1951271 kralizec
kralizec's picture

It's working as designed.  It was designed by Keynesians and has been run by Neo-Keynsians for the past several years.  When the poop hits the fan you'll know they achieved their objective.

Tue, 12/06/2011 - 13:28 | 1951328 Milestones
Milestones's picture

ROI, I tend to agree with you. The Feds charter expires next year, which I think may be the real imputus for latest round of police state bills from Congress and the reason Dumbo has relentlessly perverted the constitution of this nation.

I believe a huge double cross is in the making with the Fed walking away in 2012 (with most of the loot) and dropping all the garbage on the big banks and the people to deal with. Don't kid yourself, The Fed is the tail that wags the dog. There are a few of the big bankers on the inside, the real inside, and the rest are step and fetchits just like Dumbo, Bernny and Timmmy.

For a bit it will be a good popcorn and beer event then the curtain will drop and all the poor players will have a chance to strut and fret upon the stage like the poor idiot which as a nation of people we have become.        Milestones 

Tue, 12/06/2011 - 13:31 | 1951346 Orange Pekoe
Orange Pekoe's picture

Buyer Beware! Bernanke is a business person who sells currency. He charges inflation. His prices are high but people keep demanding his product. Prices are so high other people are buying different currencies. 

Tue, 12/06/2011 - 13:39 | 1951381 the grateful un...
the grateful unemployed's picture

if the Fed were abolished the Treasury would carry out the same functions. people would scream that we have nationalized the banks, but that's the reality anyway. but it would at least restore some of the checks and balances, and if the Fed is a government entity, (Bernanke is pretty sure he has GSE status, but the Tea Party could end that) then the power needs to be shared between the Congress and the Executive branch. OF COURSE the Fed chief serves at the Presidents pleasure, but firing a Fed chief is a ticket to economic disaster, and a political career ending move.

many of the restrictions you mention would only bring about a less independent FED. it didn't seem likely that a feckless US president would stand by and allow the middle class to be pilloried, while the 1% ride high, and watch Fed policies accomodate that end, but that's what happened. Bush and Obama, hard to say who is more at fault.

It was clear then and now that Bernanke is criminally involved in the actions he and Paulson took cramming Merrill down the BAC shareholders throat. BUT we haven't caught Paulson, and so we aren't getting Bernanke either.

and this is criminal behavior, (I would also define his interest rate policy as criminal, but we have a lot of frogmarching to do to get to BB) its a bit like banning all banks from doing business because people rob them. in the short term i am rooting for the Tea Party to cut off Bernanke from UST funds.

that would make him real independent.

Tue, 12/06/2011 - 13:53 | 1951469 marcusfenix
marcusfenix's picture

the "checks and balances" of which Peter refers to no longer exist in any practical way. the executive branch and the bureaucrats have taken over and the rule of law no longer applies, probably hasn't for a very long time now. sure congress holds the purse, but what good is that when the purse is empty and deficit spending is a matter of political self preservation? expecting congress to " do the right thing" is foolish seeing as doing that right thing would put to many greed and corruption driven interests in danger of not being fulfilled.

I think it's obvious by now that DC is no longer even pretending to listen to those with who's consent they govern. save around election time when they need your votes, not to preform any kind of valuable public service, and certainly not to attend the peoples business, but to assure themselves another two or four years of feeding at the public trough, getting kickbacks for passing favorable legislation and generally doing the bidding of those who can ensure that they remain untouched by the hardships faced by so many common serfs the world over.

the FED is the ultimate expression of this brave new world we live in, a untouchable (save by villagers with pitchforks and fire) entity that wields tremendous power and influence, yet is accountable to no one. least of all "we the people" seeing as it's members are appointed and not elected and it's business leaves no opportunity, no outlet for the common man to voice his objections in any meaningful way. you can't boycott the FED, refuse to purchase it's goods and services, you can't vote it's members out of office, or run for a post within it yourself. you can't starve this beast because it holds exclusive power to create money.  

the FED dictates monetary and fiscal policy in every practical measure and has reduced Washington's role to mere enforcers of that policy both here in the US and the world over. what has been created in the FED is they very antithesis of government of the people, for the people and by the people. In my humble opinion no serious discussion about restoring the republic and the rule of law can begin until the fed is curbed or eliminated and the power to create money and decide monetary policy is returned to congress, because as corrupt and incompetent as they are, at least it would give us some kind of starting point to correcting this mess.      

 

Tue, 12/06/2011 - 14:05 | 1951549 the grateful un...
the grateful unemployed's picture

actually you can take your money out of the charter bank accounts and place it in a credit union or community bank. there's no compulsory reason to buy Treasury bonds either. and certainly if everyone went entirely to cash transactions, they would be screwed. right now the US banking system is heading for a run, as velocity of hard cash is at rock bottom levels. when it starts to pick up it will probably signal the end of the Fed monetary policy, as people will have given up on banks and electronic money altogether. the 99% of the people own about 99% of the cash money, that is their leverage, and once they vote with their feet, and convert useless notional money to cash, they will get control back of their economy and their system.

Tue, 12/06/2011 - 15:48 | 1952127 mr_sandman
mr_sandman's picture

The Fed shouldn't be independent..... because it shouldn't exist!

 

Once again we see the folly of the crying little children who always call for regulation.  They create a regulator known as the Fed (unelected bureaucrats) to regulate the money supply as opposed to bad, bad, evil Wall Street.  Then they want democratic 'accountantability' in congress for that regulator because they realize a century later that Wall Street has been in charge of the institution the whole time.  No one who bitches about "unelected bureaucrats" having power should ever clamor for more regulation because "unelected bureaucrat" is the very fucking definition of regulation.  Bureaucrats, whether they be in the EU, ECB, Fed, U.S. government have undemocratic power because fucking democrats give it to them in the name of the "public" good. 

 

The truth is those calling for more regulation are just statists.  They want central control of the money supply, but they want their camp to be in charge of it.  Instead of just ending the Fed (and Wall Street's power), they want the government to be on both ends of the equation.

 

A government program screwing up everything royally???--just create another government program to fix it!!!  See, simple!

Thu, 12/08/2011 - 21:59 | 1961488 LongBallsShortBrains
LongBallsShortBrains's picture

Well said sandman

Tue, 12/06/2011 - 19:48 | 1953059 T-Bond
T-Bond's picture

Excellent piece. Thank you Peter.  END THE FED!!!

Tue, 12/06/2011 - 20:00 | 1953095 AldoHux_IV
AldoHux_IV's picture

No more secret organizations, backdoor bailouts, and central banking-- we don't need it.

Tue, 12/06/2011 - 23:55 | 1953662 dolph9
dolph9's picture

Don't expect American sheeple to want to hold anybody accountable for anything.

Give them ipads and netflix and food stamps and cheetos, and tell them everything is fine and to keep on "supporting the troops" or "vote this November," and they are quite satisfied creatures.

Wed, 12/07/2011 - 07:52 | 1954168 Archduke
Archduke's picture

All this diatribe of desired money-supply indepedence from policy makers is total hogwash.

Other nations seem to be able to have a central bank that is subordinate to the apparatus

of the state, sometimes the executive branch, sometimes the legislative, and some even both.

 

the fed should be nationalized and brought back under control of treasury and congress.

 

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