100 years of economic turmoil: Is it time to ‘End the Fed’?
Since the magical moment of its inception on Dec. 23, 1913, the Federal Reserve System has been a source of controversy and even contempt for a growing number of Americans, many of whom are still feeling the sting of the latest financial crisis.
A large part of the discomfort with the Federal Reserve System can be traced back to a dusty document known as the US Constitution, a historic manuscript that predates “The Fed” by 125 years, in which it clearly states (Section 8, Article 5): “Congress shall have power to coin money, regulate the value thereof.”
Yet, despite its officious-sounding title, the Federal Reserve System is not an actual branch of the US government, nor does the US government have any control over its monetary monkeying, which involves the printing of money as well as setting interest rates.
These awesome powers were admitted by no less a respectable figure than Alan Greenspan, who served as Chairman of the Federal Reserve from 1987 to 2006.
“The Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take,” Greenspan admitted candidly in 2007.
Although most Americans tend to ignore the functions of the Fed when times are good, it is when the economy hits turbulence that people awake from their slumber and start asking questions about its role in the US and global economy.
By far, the most outspoken critic of the Federal Reserve System has been Ron Paul, the former Congressman from Texas and three-time presidential candidate. In 2009, Paul published a New York Times bestselling book, “End the Fed,” a title taken from a chant he heard at a political rally at the University of Michigan in 2007.
Paul’s perennial argument that the Fed has done more harm than good for the American people seems valid when it is considered that the US dollar has depreciated 95 percent over the last 100 years, while Wall Street continues to surge.
According to Paul, “ending the Fed” would resolve some of the most persistent problems of our time.
“It would bring an end to dollar depreciation. It would take away from the government the means to fund its endless wars. It would curb the government’s attacks on civil liberties…”
Others argue that the money-making institution has been the direct reason why so many individuals are failing to realize the American dream.
Curtis Ellis, executive director of the American Jobs Alliance, said the Federal Reserve System has failed when it comes to protecting regular Americans.
“It's been a dismal failure in promoting prosperity, sustainable and prolonged prosperity and raising the living standards of Americans,” Ellis told RT.
Although the Federal Reserve is still very much in business, Paul’s relentless efforts led to the first audit of the world’s premier bank in its 100-year history. The results were nothing short of startling: From the period between December 2007 and June 2010, it was revealed that the Federal Reserve had bailed out many of the world's leading banks, corporations, and governments to the tune of $16 trillion – more than the GDP of the US economy.
It would be hard for even the most liberal-minded economist to call this “Capitalism” with a straight face. In fact, printing money out of thin air and turning it over to broke banks and corrupt corporations seems to be yet another form of Socialism.
Bernie Sanders, the independent senator from Vermont, agrees: "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else," he said.
Here are some of the staggering handouts that kept the global economy, we are told, from tumbling over the precipice (approximate figures):
Citigroup (US): $2.5 trillion
Morgan Stanley (US): $2 trillion
Merrill Lynch (US): $1.95 trillion
Bank of America (US): $1.35 trillion
Barclays PLC (United Kingdom): $870 billion
Bear Sterns (US): $850 billion
Goldman Sachs (US): $815 billion
Royal Bank of Scotland (UK): $540 billion
JP Morgan Chase (US): $390 billion
Deutsche Bank (Germany): $350 billion
UBS (Switzerland): $290 billion
Credit Suisse (Switzerland): $260 billion
Lehman Brothers (US): $180 billion
Bank of Scotland (United Kingdom): $180 billion
BNP Paribas (France): $175 billion
The argument for the Federal Reserve’s banker bailout was that these institutions were simply “too big to fail.” Although such a conclusion may seem like a shrinking of the banking cartels is in order, exactly the opposite is happening. The banks that survived the latest crash have consolidated and are now larger than ever.
Meanwhile, over the past 30 years, Americans have been helpless spectators to the scourge of corporate greed. While Wall Street bankers get golden parachutes, Joe Taxpayer gets Cash for Clunkers. Wealth inequality has never been more severe, while wages for the middle and lower classes remains stagnant. This slide into darkness even prompted Forbes magazine to ask in a recent article: “Could America's Wealth Gap Lead to a Revolt?” (September 4, 2013).
Dr. Dale Archer discussed the worker strike “affecting businesses like McDonald’s, Wendy’s, Burger King, and Yum Brand’s Taco Bell, Pizza Hut, and KFC.” Demonstrators in 60 cities across America were “protesting the federal minimum wage of $7.25 an hour that keeps them in a chronic state of poverty.”
Archer said their demand for “a living wage” twice the going rate is unlikely “given the current state of Congress.” Although Archer does not say what that “state of Congress” is, a safe guess would be its fawning support of corporate America, where every politician is dependent for his or her campaign contributions.
Archer admits that the protesters just may have a point: “For all the employment growth and claims by many that our economy is in recovery, most of those new jobs – six out of ten according to the Labor Department – are on the low end of the pay scale, which is already much lower than other first world countries."
And here is where talk of an actual “revolt” gets real: According to Archer, “the bottom 80 percent (receives) a meager 7 percent of the wealth, or, to look at it another way, the wealthiest 400 Americans have the same combined wealth of the nation’s poorest – more than 150 million people, which is almost half the population.”
Meanwhile, US banks – accounting for some 40 percent of the American economy – have doubled in size.
Amid the turmoil, one former Fed employee actually apologized for the actions he undertook on behalf of the Federal Reserve’s quantitative easing program.
Andrew Huszar, a former Federal Reserve employee, wrote an article in the Wall Street Journal in which he described quantitative easing as “the greatest backdoor Wall Street bailout of all time.”
Observing that in its 100 year history the Fed “had never bought one mortgage bond,” Huszar lamented that that was no longer the case. Mortgage bond buying is now seen as one of its main tools for greasing the gears of global capitalism and maintaining the economic wellbeing of “Wall Street's leading bankers and hedge-fund managers.”
While having little impact on Main Street, the Fed’s quantitative easing to the tune of $80 billion per month “had been an absolute coup for Wall Street,” he revealed. Huszar expressed amazement that in a supposedly free-market country, QE has morphed into the “largest financial-markets intervention by any government in world history.”
“(The Federal Reserve) has basically taken a lot of the credit that was on Wall Street’s balance sheets and brought it onto its own balance sheets,” Huszar told RT. “So it’s playing this huge support function in the economy.”
"Most Americans can’t really get credit after the financial crisis still to this day, even though Wall Street’s been stabilized,” he said. “And so we have this long-term decline in the economic prospects of the average American, and yet a lot of our leadership in both Washington and in the Fed are really focused on putting Humpty Dumpty back together again in terms of Wall Street and resuscitate a system, I think, that is working less and less for the person on the street.”
At the same time, however, the Federal Reserve seems to be the only organization in the position to exert its emergency powers for coming to the rescue of institutions that have hit the rails.
But that, for critics, is exactly the problem: True capitalism and free-market ideology demands that the ineffective organizations fail, while the healthy ones grow.
Finally, somewhere in the Fed’s crazy calculus consideration must be given for the average person, aside from the trickle-down water damage we get from the penthouse floors above our heads, otherwise our experiment in globalization must ultimately fail.
Robert Bridge is the
author of the book,
“Midnight in the American Empire,” which discusses the
dangerous consequences of extreme corporate power in the United
States. His Twitter account is Robert_Bridge.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.