This the Best the Fed Can Do in Its Defense?
by Robert Wenzel: An
Inside Look at Global Money Center Bank Activities
Federal Reserve, no doubt at the suggestion of one of the high priced
PR agents they maintain, has fired a shot at Ron Paul in his own
Chronicle carries an op-ed by Paul Hobby, who is chairman of
the Houston branch of the Dallas Fed.
a look at this commentary
that is boldly titled, "Hands off the Fed"
clear right at the start this is about Ron Paul:
our central bank is imperative just now because the House Financial
Services Subcommittee, which provides congressional oversight
of the Federal Reserve System, has a new chair U.S. Rep.
Ron Paul, R-Lake Jackson. Paul is a frequent critic who has published
a book titled End the Fed. Almost certainly, Paul will seek to
make a fundamental inquiry into whether the United States will
retain the ability to conduct monetary policy at all.
Then he says:
No one who
studies the global economic issues today would forfeit this nation's
ability to conduct monetary policy through a central bank.
is simply factually wrong. Congressman Paul has certainly studied
the issue and has not reached that conclusion, as have many economists,
mostly from the Austrian school of economics.
Hobby isn't trying to be serious when he writes:
Part of the
problem in this public debate is that few of us have much personal
experience with, or perspective on, monetary policy. It is simply
not a visible part of most people's daily lives.
is that most Americans have too much experience with the Federal
Reserve through Federal Reserve notes that buy less and less food,
clothing and gasoline every year.
A hint to Hobby,
they don't riot in Third World countries over central bank created
inflation because they don't have personal experience with inflation.
It's very personal.
tells us that the financial system went through a "near death
experience" without once discussing the role of Austrian economists,
the fact, warning that such a crisis would come about because
of Federal Reserve policies.
forecasters of the crisis, Hobby then tells us how the Fed "saved"
the country despite millions losing jobs, millions losing homes
and some losing jobs and homes. One has to ask what was left standing
that the Fed saved? The answer is, of course, Goldman Sachs. To
Hobby apparently the saving of Goldman Sachs was the saving of the
economy. The Fed did just a wonderful job:
judge these events in the fullness of time. With the benefit of
some hindsight, however, it seems the strategies employed by then
Secretary of the Treasury Henry Paulson and Chairman of the Federal
Reserve Ben Bernanke were successful, and the extraordinary measures
taken by the Fed are now expected to earn a profit for U.S. taxpayers
A profit for
the taxpayers? Hobby writes this from of all places Houston, which
is where the former headquarters of Enron was located, during the
same week the Fed makes a desperate
Enron-type move to prepare and hide huge losses on its books
by a new accounting scam called "negative liabilities".
Ken Lay would have been envious.
As for the
"profits" to date, put me in charge of the Fed with its
money printing powers and I'll quickly make the former Edsel manufacturing
this series of events retrospectively without the existence of
a central bank is quite difficult. Only the Fed could have waved
a wand and calmed the water in roiled, interconnected markets
that swooned towards a full-on contagion.
Maybe it is
difficult for Hobby to imagine but not me. Goldman Sachs would have
collapsed, as would have Morgan Stanley and JPMorgan Chase, left
standing would only have been the prudent banks that did not partake
in the mad financial escapades of those the Fed saved.
become interesting because for a minute Hobby reveals the Fed is
simply a confidence game:
dollar is a fiat currency, confidence is the only backstop, and
aggressive monetary policy provided that confidence at a decisive
con to say that aggressive money printing provided the confidence.
Huh. This part of the con isn't over. When the Fed-printed money
comes flying out of excess reserves, causing a trillion plus more
dollars floating around on the planet, confidence is the last thing
the global financial community will have in the dollar.
gives us another laugher about Fed at transparency:
is, of course, the match that lights the fires of populist dissent,
and the Fed is trying many new strategies that increase transparency
without exposing sober, deliberate long-term decisions to the
daily vicissitudes of politics.
Oh yeah, the
Fed is really reaching out and doing that transparency thing. This
is how the Reuters explained
the Fed's "transparency" when it set up its Enron-like
"negative liability program":
shift was tucked quietly into the Fed's weekly report on its balance
sheet and phrased in such technical terms that it was not even
reported by financial media when originally announced on Jan.
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Economic Policy Journal
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