On Dec. 23, the Federal Reserve System, or the Fed, celebrates 100 years of providing economic insurance for America. While that is certainly not the way most people would describe it, the function of the Federal Reserve system, as defined by the U.S. Congress, is to provide the American economy with three kinds of insurance: maximum employment, stable prices, and moderate long-term interest rates.
In other words, the Federal Reserve functions to insure and assure the American people that economic professionals who specialize in high finance are going to take intelligent, responsible steps to help make sure the American economy has as many jobs as possible, has prices that are as stable as possible, and that interest rates never get too high.
The Fed, as it is often called, does not describe itself as providing specific kinds of economic insurance. It describes itself as promoting an efficient payment system in this country, promoting the economic goals of this country, or promoting liquidity in this country.
Essentially, this means the Fed helps make sure cash flow is not a problem in the U.S. economy. It is supposed to make the naturally unregulated rollercoaster ride of the economy much more leveled out and stable.
It does this by issuing money to banks at interest, controlling the flow of money, and setting interest rates. That is perhaps the simplest way to describe the function of the Federal Reserve System in 200 words or less.
So, if the Federal Reserve System is celebrating 100 years of providing economic insurance for America, then why is their such a wide range of responses to the existence of the Fed?
The recent Rasmussen Survey in November shows 74 percent of American Adults favor auditing the Federal Reserve and making the results available to the public. Just 10 percent oppose such an audit, but 16 percent are not even sure.
This means that the Fed has the right to do what it wants, is not held accountable by the U.S. government, and is not even audited by the Senate and Congress – they rule at their own pleasure. That is probably why one will never hear anybody say they actually like the Fed. One only hears the harshest criticisms leveled at the Fed.
For example, they say the Fed was started as a response to the economic panic of 1907. Before, that the U.S. had a central banking federal reserve system twice. The first one was dismantled in 1811 under the Madison Administration, and the second one by Andrew Jackson in 1836. Indeed, on Jackson’s gravestone, the epitaph proudly reads, “I killed the Bank.”
Any conspiracy theorist will explain carefully how the Fed ranks right up their with Satan in terms of its independent willfulness and lack of accountability. Other survey results indicate 50 percent of Americans lack confidence in the banking system. In other words, if the Fed was a student, and the American public was its teacher, then on their next report card the Fed’s performance would be graded as an F. Indeed, hating the Fed is a great American tradition that ranks right up there with hating the IRS. Being able to make such criticisms openly is actually part of what makes America great.
Does anybody like the Fed? Well, honestly, the biggest fan of the Fed has always been … the Fed. It always says it does the best it can. It always defends its own actions. At the same time, any economic conservative will assuredly vow Americans live in the best of all possible worlds.
On the one hand, the fact that the Fed is unaudited and unaccountable to the American public, or the Administration, in some form seems increasingly difficult for Americans to understand. This is perhaps because the Fed has not averted disaster at every turn as hoped and intended. The U.S.A. has suffered the Great Depression and the Great Recession. In between, there have been good times, and there have been tough times.
On the other hand, well, look at which countries do not have a central banking system. In the year 2000, the following seven countries did not have a central bank:
- North Korea
Moving into 2014, the following countries have yet to institutionalize a central banking system that would function as their own federal reserve system:
- North Korea
Ultimately, and inevitably, current events will link each nation’s central bank with all the other central banks of the world’s nations to form a truly global economy. If the Fed is daunting in its power, then contemplate a global network of central banks.
The Fed seems to epitomize the economic Golden Rule: “whoever has the most gold rules.” Everything about it seems un-American.
Q: Why then, if the majority of people do not like it, and agree it should not have that kind of power, does America still have the Fed? Indeed, why will the entire world soon bow down to one global central banking network?
A: Because that’s what the history of civilization has come to, and the consensus is that a central banking system is better than being subjected to the whims of any one person who would pose as a dictator, king or emperor. America, and the rest of the world have decided rule by committee is better.
At least the highest offices and positions can be rotated regularly, and the country will not have to deal with a Caesar or a Hitler who believes that every day is “all about me day” – forever and ever. There is always the hope that the Fed will be restructured to insure some measure of accountability and transparency.
The economy could be much better. It could also be much worse. However, the birthday of the Fed will continue to spark the same sentiments across this great nation.
Americans really do not like the idea of a person or even a committee of people having unaccountable free rein to adjudicate federal monetary policy.
Yet, Americans really are grateful not to be living in Cuba, North Korea or Iran.
Most Americans know that most people in Cuba, North Korea and Iran are just like most Americans. However, Americans are proud to criticize their Federal Reserve System, while most people in Cuba, North Korea and Iran are stuck with some despotic, evil dictator who thinks he is better than everybody else, and they have absolutely no right to a dissenting opinion.
… and that’s why, on Dec. 23, the Federal Reserve System celebrates 100 years of economic insurance for America.
An Editorial By: Alex Durig, Ph.D.