Having one man control the money supply of 311 million Americans is itself a fantastic and unreal notion. When you then consider the effects of the U.S. Dollar on the remaining 6.6 billion people on this planet, the idea becomes unimaginable.
Meet Ben Bernanke: the dollar's whimsical "Philosopher King," and the Chairman of the U.S. Federal Reserve. He is arguably the most powerful person in the world, with powers far surpassing those imagined when his position was created. Who knew the Fed Chairman could become so influential?
Well, perhaps there are some who foresaw the potential. In the Communist Manifesto, Karl Marx listed ten absolute principles for overturning capitalism. Number five on his list is the most relevant when discussing the Federal Reserve: "Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly."
Even the early Communists acknowledge this as a path to destruction, to say nothing of the Founders. Who does King Ben answer to? He is not an elected official. Where does a man who makes multi-trillion dollar bets and has control of the world reserve currency and its printing presses get such authority?
Chairman Bernanke only indirectly answers to the President. He can be impeached for a crime, but not for incompetence. The President appoints the Chairman, but once confirmed neither the Federal Reserve Chairman nor the Federal Reserve Governors can be removed for their policy views. So, like a union worker, the Federal Open Market Committee (FOMC) can't be fired. All the Chairman has to do to get reappointed is help get the President reelected.
If you think the rest of the FOMC has any oversight on the Chairman, think again. As the anointed "sun king of currency," no Federal Reserve Chairman can long tolerate discord in his ranks. The pressure for the FOMC members to follow the lead of the Chairman is immense.
Granting the power to print an unlimited amount of paper "money" to one unelected individual is like playing monetary Russian roulette with a Glock. Have we forgotten that Sir Alan Greenspan is now criticized for policies that led to the subprime collapse, including keeping Fed Funds at 1 percent for over a year at the start of the contagion? But no one says a harsh word about the current Chairman for keeping Fed Funds at zero for 33 months and promising to maintain zero Fed Funds for "at least two more years," even though the National Bureau of Economic Research (NBER) claims the recession officially ended two years ago (June 2009).
Who wins from this structure? The government of course, because they borrow more money than anyone else, just ahead of the Fortune 500 companies and Wall Street traders and speculators. The losers will be savers -- those on fixed incomes, the middle class, and of course the global poor, who will suffer most because of inflationary increases in the cost of basic foods and fuel.
The Federal Reserve's rationale for focusing only on the seasonally adjusted "core rate" of the CPI is a complete sham, designed to obscure reality. The core rate weighs "wage increases," but, unlike the gross number, does not factor in food and energy. Wage increases, like employment, are "lagging" events. For the record, inflation is only a monetary event.
The Federal Reserve's current policy of "negative real interest rates" amounts to outright stealing. For example, the historic spread since 1926 between the CPI and Treasury bill rates is 63 basis points. The last reported CPI was 3.6 percent, which would put an appropriate T-Bill rate at 4.23 percent; add in the typical 25 basis-point spread between T-Bills and the Fed Funds rate and you get 4.55 percent. That is about what the Fed Funds rate should be today. Instead, Fed Funds are 0.25 percent and the T-Bill rate is around 0.03 percent, or 3 bps. The way things stand, savers are losing over 4.5 percent annually.
Some people claim that the zero interest rate policy (ZIRP), combined with printing countless billions of dollars in paper money, is leading to economic growth. If so, where are the jobs? Where is the GDP growth? Keynesians retort that there is a lack of "aggregate demand." Strange that there is no lack of "aggregate demand" for the new iPad.
Jean-Baptiste Say (1767-1832) is generally credited with the creation of what is referred to as "Say's Law" -- the original version of what has developed into modern "supply-side" economics. The basic tenet of supply-side economics is that the level and extent of aggregate demand is a function of the long-term trend of innovations and new inventions. That trend is a direct function of the demand for workers and their productivity.
The number of workers demanded, and their productivity, in turn depends on the rate of capital investment by the private sector, which is caused by market demand and the quantity of innovations and inventions. These new products are driven -- like almost all human endeavors -- by incentives, and by a group of risk takers called entrepreneurs. These entrepreneurs are generally supplied with capital by a similar group of risk takers called venture capitalists, who measure each entrepreneurial opportunity as a ratio of risk to reward. These two groups thrive in direct proportion to the level of economic freedom, tax rates, and regulatory interference found in a nation.
Remember the internet and dot-com boom in the mid-1990s? Say's Law operated with great results. Supply created demand as eBay, Yahoo, Amazon, Google, and many more great businesses flourished. Huge wealth expansion resulted for all, while the growth in profits and increased tax revenue created by these innovators helped balance the Federal budget. In the same period, Main Street saw 4 percent real GDP growth while employment increased across the board.
Now we need to return to an atmosphere of 1990s-style innovation, but be even more vigorous. This can only be done with private investment and an atmosphere of acceptable risk. It cannot be accomplished by borrowing 40 cents or more of every dollar spent by the government, maintaining zero interest rates, and devaluing the real U.S. Dollar by printing massive amounts of fiat paper money via a central bank under the banners of "quantitative easing" and "stimulus." These government methods always fail because they are temporary and extremely expensive.
Letter to the Editor StumbleUpon| Digg| Reddit| Twitter| Facebook
Victor Sperandeo is a trader and financial commentator based in Dallas, Texas. He is the author of three books, and his work has appeared in publications including Barron's and the Wall Street Journal.
The FED is this, and the FED is that. People know that the FED is Printing Money. What they DON'T KNOW, is where that Money has ended up. They think it's going for "American Jobs". They think it's going for the purpose of "Freeing Up Credit". They have no idea how they're being played for SUCKERS, by the Self Proclaimed Defender of the Middle Class against the onslaught of Millionaires and Billionaires, and their Private Jets: Barack Hussein Obama. I wonder how the American People would react, if they knew that The Royal Bank Of Scotland was a recipient of BILLIONS of American Dollars, printed by the FED? Or that UBS - a Switzerland Bank - received even more than that? Banks and Lending Agencies, all over Europe, received the Lion's Share of the $1.2 TRILLION that the FED printed, so as to help you and me. Providing that YOU and ME, are one of THEM. This FED is a Star Chamber, filled with all those Millionaires and Billionaires, that Hussein tells us he hates so much, before he goes off on a Golf Outing, with these very same Millionaires and Billionaires. (Did I mention that they get there on their Private Jets?) This Money went to them. To their friends, and fellow "Masters of the Universe". They keep printing money to SAVE THEMSELVES. The only "EASING" that's going on, is on their Spread Sheets. They are using our money to make all of the losses that their Sugar High, "What Me Worry?", Crack Addict, I'm Invincible, ways of doing business have racked up, go away. This Story needs to be told. I'm just a guy who writes on the Computer. This needs to be done by YOU. We need a Paul Revere, right now!
What a laugh. 76% of the people by polling want the Fed audited. That is the signature issue of Ron Paul. Do you think a dimwit like Perry can even put together 2 sane sentences on the subject? I will love to see them in a debate on the subject. The Fed is a huge issue for only one reaason. That reason is the 30 war of Ron Paul on this criminal counterfetting outfit. Audit the Fed. End the Fed. It is against everything the Constitution and comonsense tells us. Ron Paul is the intellectual and moral giant dragging the whole country back to sanity.
The people also by huge majorities in polling want the wars ended now and the troops home, and an end to all foreign aid. Those are again the issues of Dr. Ron Paul. Paul is is tied with Obama in 2 national polls right now. He is in 3rd place for the Republican nomination. This despite the fact he has been either ignored or attacked endlessly by the Neoconservative and liberal media. Perry is puffed up, Romney and Bachman are going down and Ron Paul is heading for the home stretch. He has the most fervent and active supporters. He raises the most money by far from small donors, and he has the issues that the people care about. I predict Perry will implode soon. Romney is a failure like last time and Mrs. Palin will endorse Ron Paul. I give the next President of the USA Dr, Ron Paul. By the way Fox has caved and will have Ron on Fox News Sunday.
The Fed is and alwas was a corrupt immoral non federal and non reserve system. If we did away with it tomorrow we would all be freer for it. Any man who would occupy any office on the Fed is himself immoral and beyond our trust. Hear that Mr. Cain?
Yea Tim the STORY DOES NEED to BE TOLD!!! Take a look at us here on Main Street...we all lost money and wealth....WHERE DID IT GO ?....Whos got the MONEY ? We all know there is no money, nobody seems to have any...It's GONE ! An old saying...." CASH isn't KING it's EVERYTHING"....Somebody, anybody....Where did it all go!
Mimi....You know where the money went. It went to the members of the Democratic Party and their crony capitalist and banking supporters / friends.
Could someone on this TAS thread with a better grasp of Federal Finances come up with a total figure on how much money Obama and his governmental spent and will spend up to the 2012 election? It should be easy, just add up the yearly Federal Budgets amounts plus the amount in the Debt Ceiling Deal.
I am guessing the total money Obama spent on the Democrats and friends is over 16 Trillion dollars. All of which came out of the Private Sector, that is you and me.
I know exactly how much of it they spent. They spent all of it. They have spent all our money, all our kids money and are spending the money of generations to come. The vacations taken by Michelle the shameless don't come cheap (10 million so far, if the numbers are even close to accurate).
The life styles of these people enjoy is so opulent it would defy the imagination of any king or emperor throughout history. I guarantee you this outwardly visible persona is only one small, visible sign of the disdain these arrogant elitists have for the American people. The only difference between our rulers today and the potentates of history is that Obama and the locusts he represents will leave behind nothing but desolation. They are actively and intentionally trying to destroy America.
I watched a movie years ago where the evil alien said, "I come in peace" before killing his hapless victim. Just like that alien, Obama simply keeps repeating "I come in peace" the liberals swoon and he eats their souls.
Right on article on the Fed.
And say, is this Victor Sperandeo the one who wrote "Crashmakers"? Great, great book.
Rick Perry wasn't very far off the mark after all was he? Treason IS too easy there at the FED.
The "ONE " person who dared to ask....Kinda BOLD Huh ? You know you get them when they sqawk the LOUDEST....He must be touching a NERVE ! About time !
Treason is the Fed. Jefferson would have shot them all. And haven't they done such a good job of "leveling" the free market, depression after recession after recession...
The Paul Revere of the ending the Federal Reseverve is the real Dr. of democracy Ron Paul.
"Notice not a single top religious leader here is issuing any warning, any challenge whatsoever regarding what's coming (ie TREASON, DE-in-dust-REAL-eyes-ation, EUGENICS). This tells you they're ALL in on it, they've all been 'brought in', they're all 'on board'. Very disturbing. Very, very disturbing indeed." -ALAN WATT
And when was the last time you heard ANYONE calling out the Torah and pan-scriptural abomination of USURY? --something out of nothing? -let alone the outright ILLEGALITY of a Constitution violating, foreign owned, debt-serf generating, 'Federal' Reserve?
------------------------WHEN?---------------------------
Dr.Ron Paul, "The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch-- Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference-- that threatens to impoverish us by further destroying the value of our dollars."?
There are more ways than one to destroy a republic. Loose money will do the trick, but so will an overly timid foreign policy and a lack of national defense.
This nation can't afford either Obama/Bernanke or Ron Paul/Lew Rockwell.
The Nation Can't Afford The GOP Ruling Elite "Lesser Evil" Democrat Light.
I graciously agree with you on that account Clint, but Ron Paul is still a nut.
Read The Founding Fathers, The Old Right, Austrian School Economics & then get back to us.
Oh I agree with Paul's economic stuff Clint. It's just that part where he is a nut that kind of throws me off the whole Ron Paul for president thing.
Go Sell Your Sand To The Arabs, Bore.
"Rasmussen Has Ron Paul Running Closest With Obama Erik Hayden Aug 24, 2011:
Who does the president fare worst against in a head-to-head matchup? On Wednesday, Rasmussen released its latest nationwide early campaign survey. And right now, Barack Obama does well against Mitt Romney (46 to 38 percent) and narrowly leads Perry (43 to 40 percent) and Michele Bachmann (43 to 39 percent).
Which means, if you combine these results with the Rasmussen poll released Tuesday, the GOP candidate doing the best against the president is....Ron Paul? Yesterday's head-to-head poll showed the libertarian trailing the president 39 to 38 percent, by presumably the same methodology."
The Tea Party Rebellion Is Here.
Rise Up In Rebellion.
The best way to measure inflation is to price the currency against gold. In 2001 the price of gold was somewhere around $225/once. Today, it is pushing $1800. That is inflation. Beginning with Bush and accellerating under Obama, the dollar has lost much of its purchasing power. Since 2000, the purchasing power of the dollar fell 22%. If a person deposited $100 in a savings account in 2000 it would be worth $78 today.
Read Full Article »