Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger
In the past few weeks, I have written about how the FDIC along with the Bank of England had developed a plan to allow the Big banks to grab depositors funds in order to bail out those very same big banks. Since that article was written, I have reviewed just what role the Federal Reserve Bank plays and how can it be improved. You may remember the role the Federal Reserve played in bailing out the Big Banks during the beginning of the Great Recession.
“As a result of the Government Accountability Office (GAO) audit of the Fed, Senate sponsor Bernie Sanders of Vermont said, “We now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world.” Among the investigation’s key findings was that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland. These decisions were all made without the public, media or elected officials’ knowledge, and they would have remained secret without an audit.” Bernie Sanders
For the math impaired, like myself, that is 16 Trillion dollars in basically secret financial “assistance” that the Fed provided the so-called Big Banks. As the GAO Audit of the Fed showed, the “assistance” was given to not only domestic banks and corporations, but to many foreign firms as well. Should the American people allow the Federal Reserve to continue to secretly fund the very same banks and institutions that played a large part in sending this country into a recession? In an Op-Ed for Truthout-org, the case is made that our country needs to consider remaking the Federal Reserve into an institution that actually works to better the economy and not just improve the big financial institutions bottom lines. Truth-Out
Before we continue, it is necessary to briefly review just what the Federal Reserve does and how does it operate. “The Federal Reserve is a privately owned US central bank that acts behind closed doors to create money and set interest rates, and it presently puts the interests of the big banks first. The Federal Reserve was originally created by Congress in 1913 and can be altered, nationalized or even dismantled by Congress.
The Fed is a private entity that is controlled by the banks. The 12 Regional Reserve Banks issue shares of stock to its member banks. The Fed is not operated for profit, and the stock may not be sold, traded or pledged as security for a loan. It does pay dividends that are, by law, 6 percent per year. But more importantly, the stock provides banks with votes to elect six of the nine members of the board of governors of the regional banks.” Truth-Out
The Truthout Op Ed suggests that while a central bank is necessary “to regulate the money supply by setting interest rates and to be a lender of last resort in a financial crisis, ” some experts suggest that regulating process can be done in a more transparent and mechanical way without the Federal Reserve Board of Governors weighing in on the issue. ” The GAO Audit referred to earlier also uncovered conflicts of interest within the Fed’s lending practices.
‘ “For example, the CEO of JPMorgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Sanders urged that “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed.” ‘ Truth-Out
Does it concern you that until the GAO audit was forced on the Federal Reserve by Congress, a member bank of the Fed and indeed, an institution run by a member of the Federal Reserves Board of Directors can obtain secret loans totaling $390 Billion? Anyone who has borrowed money from any bank knows how your economic life is examined and investigated before your loan to buy your home or your car is approved. Maybe we should all get our mortgage loans from the Federal Reserve!
What can be done to make the Federal Reserve better or make our country’s monetary policy actually work for everyday Americans and the American economy? There are many suggested improvements or overhauls that have been recommended. Public banks, modeled after the public Bank of North Dakota is one possible answer. The Bank of North Dakota takes in all of the state’s revenues and turns it into credit that ordinary citizens can use.
“Ellen Brown, the president of the Public Banking Institute, argues that we need a public bank in every state and major city. The United States has one model for public banking: the bank of North Dakota. When North Dakota farmers were losing farms to Wall Street, they organized a populist movement, and in 1919, set up the bank of North Dakota. The publicly owned bank recycles state revenues into credit for the state. Thus, North Dakotans keep their money in their community.
The result has been an ongoing success. Even during the current economic collapse, North Dakota escaped the credit crisis and has maintained a budget surplus since 2008, low unemployment and no public debt. ” Truth-Out
Can you imagine the money saved in the State of North Dakota by utilizing the Bank of North Dakota instead of private banking institutions? Ms. Brown who was quoted above provides us with an example of how much money the State of California could save by setting up its own State bank. ” Brown summarizes: “At the end of 2010, it had general obligation and revenue bond debt of $158 billion. Of this, $70 billion, or 44 percent, was owed for interest. If the state had incurred that debt to its own bank – which then returned the profits to the state – California could be $70 billion richer today. Instead of slashing services, selling off public assets, and laying off employees, it could be adding services and repairing its decaying infrastructure.” Truth-Out
The changes suggested to the Federal Reserve along with States setting up their own State banks are just two of the ways that the economy and everyday Americans can be helped. Americans can move their money into credit unions and smaller community banks and they can take advantage of or establish Time banks and Time dollars to allow for a barter like system to provide an option for Americans to purchase services in exchange for their own services or labor.
I cannot cover all the possible methods and means that can be utilized to improve the economy for ordinary Americans in this one article. I recommend that you read the Truth-Out article in its entirety and check out the links and additional references noted herein. The bottom line, in my opinion, is that the Federal Reserve, in its current set-up, has outlived its usefulness. Americans are still hurting from the recession that the Federal Reserve did not see coming. The recovery is being delayed, in part because of the policies of the Federal Reserve and its penchant to work for the Big Banks instead of all Americans.
We need to take back our economy and work to convince Congress to revamp the Federal Reserve. The individual States can save Billions for their citizens by setting up their own public banks. Wall Street and the Big Banks will claw and scratch to keep the Federal Reserve in their pockets, but this country cannot survive without a sea change in how the Fed works and how Americans have access to credit.
Can the Federal Reserve be reined in and revamped to help ordinary Americans? Do you think that your home State would be able to establish a State bank? Have you moved your money into credit unions or small community banks? What else can be done to improve the economy without utilizing large private financial institutions?
Additional references: Clearing the Fog Radio;
84 thoughts on “Fed Up With the Fed”
“And those without money are 3/5 human, or chattel..”
David Blauw, that simplistic statement could undermine every law and every civil notion that is currently hanging by a tenuous thread in this Country. Plus, it aint true.
Is the State of North Dakota a socialist state? They have a state owned bank which has worked very well for its citizens.
1, April 22, 2013 at 1:07 pm
Romney and other wealthy people dont keep their earnings in a vault. they invest it in other ventures so they can make more money and put more people to work..
HAHAHAHAHAHA, That I disagree with. You are far from 100% correct on this one. …. However I ain’t 100% correct either.
Bron, it’s all wheat
Gold, silver, copper and other precious metals like palladium and platinum fill that bill. There is a limited supply, it cost money to mine and produce, it has industrial use
These metals are just cleaner and more convenient to own. When your neighbors are dying of starvation, it easier to say “sorry I have no wheat for you”.
Money is never more precious than food. ……. Unless the individual and society is eager to believe it.
And those without money are 3/5 human, or chattel..
And what Mike said. Excellent retort, ARE.
“There is a limited supply, it cost money to mine and produce, it has industrial use.” – Bron
The precise reasons why using it as a basis for currency is too volatile and an invitation for runaway inflation as the supply either dwindles or remains static while demand is ever increasing. Also, a certain amount of inflation is simply normal and a reflection of scarcity. That the Fed as a central bank isn’t a 100% efficient brake on inflation is simply the reality that 100% is usually impossible. Again, the problems with the Fed are private ownership and a guaranteed dividend skewing their priorities to private interests over the public trust, not that they don’t work as a brake at all.
As for monopolies? I’m against them in most but not all instances. I am almost universally against privately held monopolies though. They can have utility – such as in realizing operational efficiencies in the provision of health care insurance universally – but when you attach a profit motive, monopolies usually go wrong. Ultimately it was the profit motive – and uncontrolled greed when it came to LD rates – that did MaBell in. Monopolies, like corporations, are a useful tool, but they have expanded in scope beyond utility and into the realm of social harm in the name of profits.
Believe it or not, society exists and some endeavors should be done with the best interests of society placed well in front of any personal interest in private profits. Or do you think the Roman aqueduct system was built for personal profit? They were capitalists don’t you know.
I havent finished yet. I just stopped there for your comments.
I sidestepped no issue. And presented some facts about central banks.
What controls inflation is having a money that is actually unable to be printed and has to be manufactured and have some store of value. Gold, silver, copper and other precious metals like palladium and platinum fill that bill. There is a limited supply, it cost money to mine and produce, it has industrial use.
“Also, the gold standard? Really? A return to the gold standard would do nothing but increase market instability and totally negate the use of central banks in controlling inflation.”
We had a rise in living standard while we were on the gold standard in the 19th century. Real wages doubled in that century and there was relative stability among nations after the Napoleonic wars. The 20th century was a bloody one and we had central banks which financed them. They may not be the only cause but they sure did fund them.
We also have had inflation that the fed has not kept under control, your money is worth much less now than it was in 1913. In 1913 your money was worth twice what it was in 1813.
The FED is a monopoly granted by government. Not much private about that. I thought you didnt like monopolies?
Nice attempt to sidestep the issue of control vis a vis public vs. private.
And by nice I mean transparent. The reason the Fed sucks so bad is it is private and guarantees a dividend. That’s naturally going to skew their policy toward private interests and away from public interests.
Also, the gold standard? Really? A return to the gold standard would do nothing but increase market instability and totally negate the use of central banks in controlling inflation.
if you operate in a corrupt system and have integrity what does that matter? Eichman had “integrity” and operated in the Nazi system which was morally corrupt.
If you have true [moral] integrity you do not work for a corrupt system you work to end it.
if executives at BP are breaking laws, then throw them in jail.
Romney and other wealthy people dont keep their earnings in a vault. they invest it in other ventures so they can make more money and put more people to work.
what is the FED? It is a central bank. What is a central bank?
“Central banking is a system in which a legally privileged bank, a “central bank,” has a government-granted monopoly on the creation of base money (i.e., currency and bank reserves) and the power to dictate the ratio of reserves that other banks must hold to back deposits. Under a central banking regime, this base money is accorded an exclusive legal tender status. No institution or person other than the central bank is legally permitted to create such money (to do so would be to engage in counterfeiting), and no one is permitted to use anything other than the central bank-authorized money to pay for goods or services or to settle debts.”
Henry Mark Holzer, Government’s Money Monopoly: Its Origin and Scope and How to Fight It (New York: Books in Focus, 1981).
The fed issues fiat currency which is not based in gold and so has no real value. It has been used to finance our deficit spending for all of these many years with no accountability to reality [markets].
The fifth plank of Marx and Engels’s Communist Manifesto of 1848, calls for “Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.” And to here you tell it, a central bank is a capitalist idea. Am I missing something?
[central banks] “were not at the cutting edge of a market economy,” that “central banking is almost entirely a phenomenon of the 20th century,” and “to some extent, central banks were looked upon and created as a means of financing the government.”
Paul A. Volcker, “The Role of Central Banks,” in Central Banking Issues in Emerging Market-Oriented Economies, A Symposium Sponsored by the Federal Reserve Bank of Kansas City (August 23–24, 1994).
“Final freedom from the domestic money market exists for every sovereign national state when there exists an institution which functions in the manner of a modern central bank, and whose currency is not convertible into gold or into some other commodity.”
Beardsley Ruml, “Taxation for Revenue is Obsolete,” American Affairs, January 1946.
“That the rise of central banking has led necessarily to the demise of the gold standard is clear from monetary history (and is codified in Gresham’s Law: bad money drives out good money). Three broad phases are discernible, with slight differences depending on the nation studied. The first phase is a system of relatively free banking on a pure (classical) gold standard (most of the 18th and 19th centuries); the second phase is central banking based on increasingly diluted and manipulated forms of the gold standard (World War I to 1971); the third phase is a system of full-fledged central banking with pure fiat money issuance having no tie to gold (since 1971). The earlier centuries are characterized by the rule of law, constitutionally limited governments, relatively conservative spending, and rational banking practices. In contrast, the past century, especially the period since 1971, is dominated by the rule of men, unrestrained government, reckless spending, and harebrained banking practices.”
Lawrence H. White, “The Rule of Law or the Rule of Central Bankers?” Cato Journal (Fall 2010).
I think it pretty safe to say that a central bank is not a capitalist idea, that it makes financing wars easy, it takes away the wealth of individuals through deficit spending and it will eventually take away our liberties.
A great equalizer for the commons would be if wealth went stale.
Scrooge McDuck if I remember correctly from my comic reading years, would go in his vault and “bathe” in his accumulated wealth.
BTW he can not possibly be alive today ..can he? I wonder if he willed all his wealth to his nephews?
Anyways, once wealthy always deserving? Mr. Romney “earned” 20 million dollars last year. Mr Buffet a gazzillion? What is the meaning of earned.
4000 years ago in our economic infancy, wealth was perishable. Something had to be done with it,…or the wheat would sour and be of no benefit to anyone. Today we have magic alchemic wheat. It can be stored, hoarded, lusted over, and removed permanently from cycling down to the level of honest labor. It is, was, and will be, the honest labor of the commons that create the goods and growth of economic health. It is the greedsters and hoarders that rob the honest efforts of honest labor.
Necessary income for today, comes from resources and focused labor.
Wealth is an accumulation of things, not necessary today.
Great wealth accumulates things, not necessary at all.
But for even greater accumulation, to no purpose at all
That drains the pool of Wealth, Necessary for the incomes of Today.
This link goes to the third lecture in a series of lectures by Richard Bulliet.
I specifically refer to his topic of wheat, labor, and centralization discussed
from 34:minutes to 50 minutes. The title of these lectures is,
Richard Bulliet – History of the World to 1500 CE.
Big stones and the centralization of civilization. Big mounds of dirt and the needs of a laboring society. Small stones and the preservation protection of wealth. Tons of wealth converted to easily transported wealth.
… The stock market of 2000 BC. LOL How and why it began.
The below is me ruminating tangentally about the thought bubbles bouncing around between my ears, activated by the concepts and theories presented in this lecture. ……. Normally my thought bubbles leak out and evaporate into the ether. This morning they leaked out onto my computer.
Wheat was an original commodity of ancient times. Being rich meant you had a lot of wheat. Today wheat costs 300 dollars a ton. 1000tons x 300 $ = 300,000 dollars.
To be in the top 10% earners today, based on ancient income, you would need a silo in your backyard with 1000 tons of wheat in it, minus what you consume in a year. Of course you would then (if the silo was not completely emptied that year), have to build a new silo for the next years income. Carried over income becomes wealth. I’m quite sure even Hercules could not consume 1000 tons of wheat in a year.
The few today that have 3 billion dollars of wealth would have 10,000,000. tons of wheat in their backyard. ….. These are gluttons of Greed.
We do not see the obscene imbalance, perverted egos, and the Mountain of hoarded wealth these “neighbors” withhold from the commons. The Waltons, Buffets, Soros, Kochs, have little pieces of paper that represent 10 million tons of wheat. We don’t see these silos, and mountains of insane accumulation. Society praises and raises them as superb and successful members of society.
4000 years ago among an agrarian society, these folks would not exist. (except in the guise of kings and authority of the state).
Why does an individual, and or a nuclear family need 10 million tons of wheat, withdrawn from the commons.
Money, letters of credit, investment in stocks, trust and faithful backing of currency, sure saves the effort of lugging around tons of wheat. Our monetary system is a brilliant creation of tested and proved growth of rational society. Our monetary system allows and enhances the good of the commons. ……. Till it doesn’t.
Individuals and rule of government that is pro greater and greater accumulation of wealth, to fewer and fewer individuals (or corps) has lost the 5000 year path of advancing civilization. Society that exists to serve the wealthy is a society that has fallen from the rising path of our human struggle. Money is still wheat, Money is food, Money is shelter. I supply my labor in exchange for money.
Money compensates labor. …..Till it doesn’t.
Profit for the sake of profit, Extreme profit for the sake of Extreme profit is a perversion and corruption of economic evolution. Accumulation of extreme wealth through profit can only exist by denying a balanced income and earning of the labor of the commons. Extreme capitalism cuts jobs, lowers wages, lessens opportunity….. not for the greater good of all, but for the greater accumulation of individual profit. Having 10 million tons of wheat and rigging the government and laws to acquire another 10 million tons is obscene.
This philosophy denies the good of the commons, and denies the forwarding of an enlighten society. It contributes and leads to ill health and repressive degradation of the society. This is my personal and valid (to me) perception of where we are at today.
Oil well fires happen in the Gulf, I used to see them burning when I surveyed offshore setting oil rig jackets, oil rigs and pipe lines. I also heard about people being killed in rig accidents and helicopter crashes. Drilling for oil is a dangerous business and people die.
The fact that we dont have more catastrophes is a testament to the skill and knowledge of the many people who work in that industry.
I might also point out they were drilling in 5000′ of water, in the early 80’s when I worked for a drilling company in Alaska we were drilling in 500′ of water and that was considered deep.
So I am not sure what nationalizing BP would do, maybe if Obama’s administration had allowed more drilling closer to shore those people would still be alive and the environment would not have been damaged.
The FACTS are that when BP was privatized it went from being a responsible corporation to one that killed scores of people for no good reason, trampled on the environement, and cut costs to give the execs billions of pounds. THAT is the problem. When you have large corporations running things ONLY for their owners and looking out ONLY for the interests of the execs. what happens should be a surprise only to a fool. When the owners were the British public, it was run as it should be run.
Bron tries to divert attention from the fact that BP was and is a danger to the public. It was found guilty of criminal charges of manslaughter and should have had its corporate charter revoked. Its assets sold off, or preferably nationlized. To leave such a dangerour business in the hands of private interests is only an invitation to more disasters since NO government can have enough regulators to keep tabs on them. Oif field drilling and the oil business has inherent hazards to be sure. Even nationalize oil companies will have accident, but to leave them in private interests with little or no oversight only invites more disasters.
Such companies have PROVEN that they are irresponsible through the oil price rigging, intense lobbying that has resulted in global warming and stymied the political solutions that are needed. They deny science, pollute the political, and physical environment, and kill people. That alone should be more than enough reason to get rid of them as private companies.
As for BPs offshore drilling, I have to note that Brazils nationalized oil company is doing beter than BP and in deeper waters, yet they have mandated measures to prevent what BP got away with in the Gulf. I suggest you read Greg Palast on BP and it misdeeds in the Caspian Sea, and the Gulf.
“The FACTS are that when BP was privatized it went from being a responsible corporation to one that killed scores of people for no good reason, trampled on the environment, and cut costs to give the execs billions of pounds. THAT is the problem. When you have large corporations running things ONLY for their owners and looking out ONLY for the interests of the execs. what happens should be a surprise only to a fool. When the owners were the British public, it was run as it should be run.”
Excellent reply and a telling rejoinder to our distinguished Randian. 🙂
Do you have problem with people of integrity running the Federal Reserve? I reread your post and am not clear what you are trying to convey….. People that are running it now are running it with their special interests in mind…..
Yeah. Because your laissez-faire fairy tale version of economics has worked so well. I’d say “Surely you’re not so blind as to not see that a privately held central bank is a creature laissez-faire economics and is directly contributory to the corporatist fascism you bemoan” but I know you are exactly that blind. That’s what happens when you worship greed and follow the philosophical and economic dictates of sociopaths.
do we have a court system? If my mother is taken advantage of by a business then I take them to court or have them arrested.
Look at the recent thread about halal meat and McDonalds, that is proper government regulation. Having congress or the Dept of Ag write legislation to protect people from non-halal meat is not.
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