In his latest fulminating column ('Fed up with Revisionist Bashing of the Fed') Robert J. Samuelson takes aim at "revisionists" in both the Occupy Wall Street movement and in the Tea Party who have been "creating stories about the Federal Reserve that satisfies some political, ideological or journalistic urge'. Hence, in effect, engaging in historical revisionism by portraying the Fed "as the epicenter of an unspoken conspiracy to use government money to benefit Wall Street at everyone else's expense".
As with other bald claims from the elitist cognoscenti concerning "revisionism", such as in the Kennedy assassination, we must examine the factors and issues more closely. This inevitably invokes a process whereby we must separate 'wheat' from informational 'chaff', not easy at all in these times.
So let's start with some facts and we will reference here Samuelson's words on the basis for creating the Federal Reserve in the first place (ibid.):
"Congress created the Fed in 1913 to act as lender of last resort for the nation's banking system. The legislation stemmed from the Panic of 1907 when the absence of a lender of last resort aggravated a severe slump".
Well, let's say that this is the vanilla default story, roughly equal to the 'Oswald did it' trope for the Kennedy assassination. Appealing to the ineluctably lazy or ignorant, but not to the natural skeptic. As with all such tropes, facts get mixed in with fiction, and only the diligent truth pursuer can ferret one from the other. For example, it is true that the 1913 act creating the Fed was spurred by the Panic of 1907, but what was it one famous pol once said: "Never let a good crisis go to waste". So it was with using the veneer of financial stabilization to create an ad hoc adjunct to the government which never would have seen the light of day otherwise.
But, as I noted in my book, The Elements of the Corporatocracy (Chapter 1):
"The first offshoots of a Corporatocracy did not transpire until the Federal Reserve Act of 1913.
On a bleak December day in 1913, with most members of Congress absent for the holidays -this misbegotten Act, under a veil of deception and hubris was passed into law.
Essentially, it removed the Constitutionally appointed money creation powers from the Treasury and "delegated" them to a private Banking Corporation called the 'Federal Reserve'."
Leaving out taxing details, the act simply authorized the establishment of a "Federal Reserve Corporation", run by a Board of Directors (The Federal Reserve Board), and divided the United States into 12 Federal Reserve 'Districts'. In other words, a non-federal adjunct for private banking agendas had been created under the guise of a federal (constitutional) amendment.
The law removed from the Treasury the right to create (print) money, or have any say or control over its creation. This instead was granted to the Federal Reserve Corporation. To underscore the importance here, one needs to realize that money is the lifeblood of an economy. It is more fundamental than any other resource unit and ultimately is the primary determinant of the quality of life of the individual.
Financial historian James Livingstone ('Origins of the Federal Reserve System- Money, Class and Corporate Capitalism, 1890-1913, p. 233, Cornell University Press, 1986, has noted:
"...the creation of the Federal Reserve is an epsiode in, or evidence for, the emergence of a modern ruling class.. "
Need I emphasize that last part? Evidence for the emergence of a modern ruling class. In a subsequent blog I will take on how the emergence of the Fed dovetailed with Elite Political theory and Vilfredo Pareto's Pareto Distribution. The point of Elite theory being that not all humans were created equal, i.e. in aspiring to the pinnacles of society, but that the truly stratospheric heights were to be reserved for select "elites" of money, class and political power. All others in the given society could go pound salt, or suck it. Almost coincident with the emergence of Elite Theory in the U.S. the term "citizen" was replaced with "consumer". An accident? Hardly! It cynically and automatically diminished the person's purview of power to that of a grazing cow trying to choose which grass to feed on, via the mere substitution of a word.
So the question next emerges as to why the Fed isn't the image of the pin stripe, selfless bunch that Samuelson makes it out to be? As noted by Livingstone, $30-40 billion a year- is brokered into the system. That is, made available for lending to banks by escalating debt. This is achieved by the Fed using the money created to purchase government bonds, then making this (debt-burdened) product available to private banks, who must charge much higher interest than the bonds to secure what they regard as a 'reasonable return'.
And so, while nascent Americans, in their revolutionary fervor, had thrown off the shackles of one monarchy, within 137 years they came under the boots of another. This one devoted to the business and banking classes, who demanded ever more favored treatement vis-a-vis 'ordinary' citizens.
In 1913, appropriate media propaganda accompanied the takeover, including such favorites as:
'the Act removed money from politics', and 'prevented banks from being at the mercy of boom and bust cycles'.
Like all quintessential lies, there is the element of truth in each. But not enough to merit the powers granted to the various Federal Reserve Boards, and especially its central one , in Washington, which soon evolved into a 'fourth branch of government' with powers to control not only money supply, but monetary-economic policy.
Now, what about Samuelson's claim of some "conspiracy" to use government money to benefit Wall Street?
Well, this depends on how one defines conspiracy. Since all Fed discussions, decisions are ultimately made public, released out in the open, I would hardly call it a "conspiracy". But we do know, and I have already blogged on these issues, that when a group in charge of the money supply keeps interest rates and hence bank -CD yields at essentially ZERO, it IS benefiting the money pushers and traders on Maul Street. And it must know, because it's not comprised of stupid people, that average citizens - earning next to nada in their bank savings accounts, CDs or money market funds, will be forced to chase yield in risky stocks at some point. In other words, expose themselves to possible massive loss of principal, say in their 401ks.
They also know this process must be of benefit to the stock exchange and traders who will end up being the primary beneficiaries of this money. (Through their excessive fees and commissions, which remain irrespective of economic good times or bad, stock crashes or gains.)
It is also disingenuous to insist that the Fed's quantitative easing (both forms 1 and 2) were solely done out of the goodness of its little heart, to "save the country". Not when the main effect was to engender even cheaper stores of money for the speculators and commodities traders to gamble with! While Joe and Mary sit unemployed in their soon to be foreclosed home.
As for the fuss Samuelson makes over the claimed "$7.7 trillion" the Fed was to have secretly lent to banks, I already exposed that as false in a prior blog:
http://brane-space.blogspot.com/2011/12/stocks-still-fastest-way-to-lose-your.html
As I noted:
"The Fed has pumped more than $1.6 trillion (not $7.7. trillion as has been cited in many liberal blogs) of "free money" to the banksters which has essentially helped keep fixed income yields extremely low as its chased the unwise into risky stocks"
So no, I was never one of the bloggers who hyped the numbers. I tend to check my facts before I commit fingers to keyboard!
What I would like to see, all Samuelson's blather to the contrary, is the Fed take a more responsible role toward the average citizen, on Main Street. They could do this by raising interest rates to at least 1.0% so seniors don't have to chase yield in risky stocks when they will likely eventually be faced with higher out of pocket health care costs.
But in the end, the point to bear in mind, is that so long as the Fed exists it will more likely act to benefit the banks and the speculators on Wall Street than the average Joe or Jane. As Livingstone observed, this is exactly why the Fed's creation was "evidence for the emergence of a modern ruling class".
And as we know so well, ruling classes don't like to share!
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