Our money supply has for the past 100 years been controlled by a secretive central government authority referred to benignly by insiders as the “Fed”: more formally as “The Federal Reserve System.” Some people believe it’s as fearful and potentially harmful to our wealth as the IRS. Certainly, it is as furtive.
Hundreds of congressmen agree. Not long ago the House passed H.R. 459, a bill they labeled “The Federal Reserve Transparency Act.” But it languishes in the U. S. Senate. That the Fed is a political animal shows up in the votes to enact H. R. 459: 327 for; 98 against—97 Democrats voted against opening the curtains behind which the Federal Reserve operators lurk. And, of course, the Senate leadership, now controlled by Dems, isn’t interested in letting the people learn how the Fed operates.
One economist, Alejandro Chafuen, writing in Forbes magazine this past July believes that openness about monetary affairs is more than an economic issue; it’s also a justice and morality concern.
This isn’t a recent social controversy. Moralists since the middle-ages have been writing about the “perils of government monetary manipulations,” writes Mr. Chafuen. Fortunately, because few of us want to wade through volumes of Old-English and learn to read German, there are modern readable recounts explaining the mysteries of money manipulation. Chafuen cites what he calls a new “thriller” about the Fed by Brad Thor titled, “Hidden Order.” AIso, I can recommend Ron Paul’s 2009 compelling indictment titled to his main point, “End the Fed.”
It’s reasonable to assume that many statists in and around the power brokering political class in Washington, D. C. don’t want the people to learn how our money is being manipulated for their benefit. Being exposed, they might lose some of that power and the benefits that go with it. Sen. John McCain, for example, disdainfully put down Ron Paul, saying he “doesn’t know Jack about economics.”
McCain seems to think that we the people and our responsible representatives should shut up and leave all this complex stuff to experts; if we know what’s good for us. Yet, one needn’t be an expert in economics to learn what’s going on and to know right from wrong. Ron Paul understands; McCain doesn’t. Even some of us ignoramuses’ “clinging to our guns and religion” in the States can learn why we should care about this. In fact, Ron Paul in Chapter One of his book clearly explains “Why You Should Care.”
Current economic news reports also give us clues about Fed foibles. A July 12, 2013 Bloomberg News story published in Investor’s Business Daily reveals a big problem. Merely a few words from Fed Chairman, Ben Bernanke, have the power to disrupt investor’s behavior and monetary markets. Bernanke “called for maintaining stimulus amid division among policy makers on when to slow bond buying.” Result: investor’s indecision and confusion in the market.
Bernanke and the Federal Reserve Banks have been tinkering with our entire economy—and that of the world. He uses insider jargon such as “quantitative easing”: meaning the Fed prints money and has been buying $85 billion in Treasury bonds and mortgaged notes each month. The Fed has 21 “primary dealers” obligated to bid at U. S. debt auctions. Few people understand how this scheme works. Worse, we don’t know who benefits and who loses. I’ll bet that most of us lose in these secretive deals.
Ron Paul points out that the Fed has unique power: it can create money “out of thin air”—giving the illusion of wealth creation by “open-market” operations, changing reserve “ratios,” and influencing interest rates. The results: the Fed perpetuates the myth that there is an ideal money supply; holds a federal monopoly on the money supply; directs financial power to “a small circle of government-connected insiders”; creates “wild fluctuations” in international currency; and depreciates the dollar (a dollar in 1913 when the Fed started meddling with money is today worth only 3-cents).
While a few insiders with access to Fed secrets benefit, most shareholder investors and their advisors are confused and hesitant about investing. And banking, says Paul, is a “dice game.” Recently, a letter to shareholders from the CEO of a mutual fund in which we invest explained how the Fed muddies the financial waters.
In the first half of 2013, he wrote, credit markets benefited from a low interest rate and “government liquidity stimuli.” But after “talk” of the Fed slowing “quantitative easing programs”… “markets finally began to cool.” In other words, while the Fed dumps money into markets (giving the “illusion of wealth”) temporarily some people benefit; but when the presses slow down reality sets in.
In June 2013 Bernanke suggested winding down the Fed’s “extraordinary and unprecedented efforts to stimulate the economy and employment,” wrote our mutual fund manager. But the specific timing was unclear “which has made securities markets nervous,” we were informed.
If things improve, said Bernanke, “we will begin to respond later this year.” Our CEO wrote that this comment “spooked the bond market dramatically.” The result was “major selling across the board.” How can anyone invest with confidence when a handful of federal bureaucrat’s arbitrary decisions have that much influence on the economy?
We should all be “spooked” by the Fed; leading us to demand that our U. S. Senators vote to pass a Federal Reserve Transparency Act into law. Better yet, we should end the Fed.