On initial observation the Federal Reserve System is pretty much straight-forward, But, any organization can be perceived in one way when it’s really something else. The Fed appears an organization benefiting the people, it’s really self-serving and totally dedicated to one thing-MONEY. And, in NO way can it be assumed it’s your money we’re talking about.
The Fed is composed of Private and Public concerns ruled by a seven member Board of Governors (BOG). The governors are appointed by the President of the United States (POTUS) for staggered 14 year terms. They’re confirmed by the Senate. They control 12 District Reserve Banks, set national fiscal policy and oversee the national banking system.
The Chairman and Vice Chairman are appointed by POTUS from seated Board members. The Chair and Vice Chair serve four year terms and are eligible for re-nomination at the end of their term.
But, the BOG isn’t responsible to either the Congress or the President. The BOG operates scot-free of outside influences and controls. This allegedly assures there’s no undue political influence applied over The Fed’s operation. It can tell anybody, “whiz-off, we’ll do it our way”. The Fed and individual banks are subject to limited auditing by the General Accounting Office (GAO). The GAO can’t audit most of The Fed’s policy actions or decisions concerning direct loans to institutions, open market operations or other transactions under the direction of the Federal Open Market Committee, the main operational committee of The Fed. The GAO can’t audit any dealings with foreign governments or other national central banks.
The American people can’t gain explanations of how their money is handled in the world marketplace. Recently Representative Ron Paul (R-TX) proposed legislation: The Federal Reserve Transparency Act (HR459); and Senator Jim DeMint (R-SC) proposed Senate Bill S-202 as an amendment to audit The Fed. DeMint’s action was blocked by Democrats in the Senate. Bloomberg News filed suit in Federal Court to force disclosure of firms guaranteed funds and benefits. None of these changes to the way audits of the Federal Reserve System is without challenges.
This might have something to do with The Fed’s inability to develop or implement newer theories and practices. The BOG is composed of ideologically restricted economists and bankers. Governors have their pet systems and schools of thought. The Keynesian School seems to be the one most economists and political brain crusts rely on today. No matter the controversy, the continuation of this train of thought appears to be derailing today’s economy.
Mercantilist, Classic, Marginalist, Marxist, Institutionalist and Keynesian Schools of thought over the centuries have been in and out of vogue. Others believe in Monetarism, that monetary growth has a critical role in affecting inflation. The Rational Expectations theory says government involvement in the economy should be limited because of its artificial interference with the market. Then the Supply Side Economists see a need for incentives to save and invest in the nation’s economy.
But the problem is a governmental drive to prevent change. Change equals loss of control and that’s unacceptable to the powers that be. Under the guise of promoting a central banking system beyond the influence of partisan politics, it’s noted the Chairman regularly mirrors the economic theory of the incumbent nominating the member to the position of Chairman. This ensures political directionality by the party. Keynesian Theorists control The Fed. The economy is tanking at the moment as tried and true policies, guaranteed to produce specific results produce those same disastrous results because the Governors keep saying: “Wait! It’ll come together shortly.” How long is “shortly”?
The BOG appears stuck in their specific ideology and can’t see or understand they might need to look in different directions to repair this economy.
We’re part of an international community suffering serious economic perils. ALL economies are symbiotic or feed on the good health of the other economies. As America has traditionally been accepted as the leader in world economics and the dollar has been the hallmark of success; we might want to brainstorm new ideas and approaches to world finance.
The worlds’ economies are in flames and Nero Bernanke and the gang continue fiddling away.
Thanks for listening.