Comment: see Janet Yellen’s pledge below. Who does this woman think she is fooling, even herself? The FED is there for the bankers. It has a history of consistent erosion of the value of the dollar. It is a house of increasingly worthless paper money and holder of bad loans it took off the books of reckless banks. The FED takes money off the top of all money created and its member banks clearly have insider knowledge because it is setting policies and knows which moves to make prior to any changes.
The FED has become an interest rate house, that is all, and once that interest rate plunged to bail the country out of paying a trillion dollars a year in interest on its national debt, it is now hooked on that low interest rate which is robbing savers of their money. In 5 years ~8 trillion in saved money will lose about half of its purchasing power and she makes no pledge to save American’s wealth.
Her pledge is like things are normal. The entire monetary and financial system needs an overhaul. We have debt-based money since 1970 when gold-backed currency was abandoned. She is a “print and spend” money manager. She needs to say the country, beyond currency and monetary reform, it needs to show the world it is responsible to its debtors by bringing spending under control.
It is John Mauldin who explained the US economy failed about 15 years ago when GDP growth flattened and government began to grow to make up the difference. The nation has gone about as far as it can go with taxation. (In fact, the (un)Affordable Care Act is just another tax mandate that many low-income Americans cannot afford.)
She pledges to address unemployment by printing more money to perk up consumer spending. But there is no conduit for unemployed Americans to get that new money if they don’t have a job! The jobs moved offshore, if you didn’t notice Janet. And the wealthy took their money offshore too, as well as the corporations, as insiders apparently know the US is a house of collapsing cards.
Imagine America is a sinking ship and the Captain is blaming the crew for its circumstance while nothing is being done to save the passengers. Janet is the purser on the ship and is saying she can print more money. How irrelevant.
She needs to cease being a mouthpiece for criminal bankers and say something like this: “I Janet Yellen, who assumes this position as head of The Federal Reserve banks, pledges to restore sound asset-based money to this country, to “save the savers” by restoring interest rates to a level of some normalcy, by demanding lenders have adequate reserves or cease distribution of money to reckless lenders, by ceasing to remove bad loans off the books of reckless lenders and thus becoming part of that recklessness, by reform that even includes abandonment of the central bank itself which has never achieved its mandate, to maintain a stable currency.
We must cease hiding behind false numbers — the unemployment rate is in excess of 20% and inflation in excess of 9%. We as a nation can no longer meet our obligations to our creditors by selling T-bills. We must pay down the national debt by beginning to use our assets rather than currency to pay off loans from foreign creditors.
We must cease attempts to grow the economy by growing government. We must encourage growth in the nation by investment in real technologies (not solar or wind energy schemes), but natural gas-powered automobiles, more efficient commercial transport systems, more efficient energy creation, and a healthier population that doesn’t require all of the expensive and often needless medical care it now consumes.
I have little power to achieve any of these objectives, but I have a voice. The country has reached a dead end that requires reform from top to bottom. It must cease glorying in its great past and re-invent itself. It must rise beyond politics and crony capitalism. It must promote competition, for example, between natural gas and petroleum fueled automobiles, between dietary supplements and prescription drugs, and even competition between currencies. Allow competing currencies so there is incentive to produce currency that consumers have confidence in. The currency that is backed by the soundest assets, even gold, will rise to the top.
Without timely reform, there is no reform. Those who stand in the way and want the status quo must step aside, even be pushed aside. We must look at our country in the mirror and see it is not what it once was. It needs more than a face lift. To these ends I pledge myself. ” Americans will never hear words like these. — Bill Sardi
It Sounded Like Janet Yellen Introduced A Third Mandate For The Fed
Some people seem surprised by Janet Yellen’s comments that give the appearance that she adheres to a triple mandate:
“I pledge to do my utmost to keep that trust and meet the great responsibilities that Congress has entrusted to the Federal Reserve–to promote maximum employment, stable prices, and a strong and stable financial system.”
I don’t really see how this is surprising. The Fed claims to have a dual mandate – to maintain price stability and promote maximum employment.
But it can really only achieve these mandates if it FIRST maintains a stable financial system. Make no mistake here. Janet Yellen is an exceedingly intelligent woman. She understands the Fed and the Fed’s history like the back of her hand.
And I can assure you that she is uniquely familiar with the Fed’s history. She knows full well that the Fed wasn’t created to hit employment and inflation targets, but was actually created to support the payments system. As the Fed has explained:
“By creating the Federal Reserve System, Congress intended to eliminate the severe financial crises that had periodically swept the nation, especially the sort of financial panic that occurred in 1907. During that episode, payments were disrupted throughout the country because many banks and clearinghouses refused to clear checks drawn on certain other banks, a practice that contributed to the failure of otherwise solvent banks. To address these problems, Congress gave the Federal Reserve System the authority to establish a nationwide check-clearing system.”
The Fed system was created to support the private payments system controlled by the banking system at the time. In fact, the Fed system is modelled after the New York Clearing House model which was a privately managed clearing house for bank payment settlement that existed prior to the Fed.
After the crisis of 1907 the government got more involved in the process to help oversee and manage the process. The result of this was the Federal Reserve System which is really just one big payments system attached to the banking system. Which is another reason why it’s so bizarre that some economists want to “keep banks out of macro” while also focusing on nothing but central banking.
To understand central banking and monetary policy IS TO UNDERSTAND BANKING.
The Fed was created with one primary mandate – to help stabilize the payments system. And if it doesn’t achieve this goal then it can’t even begin to think about inflation and employment. Some economists seem to have missed this important fact about the history of the Fed and have instead constructed this mythical world where the Fed hits employment and inflation targets without working with the banking system. Thankfully, Janet Yellen isn’t in that camp.
This post originally appeared at Pragmatic Capitalism. Copyright 2013.