1/26/2011–Introduced.Federal Reserve Transparency Act of 2011 – Directs the Comptroller General to complete, before the end of 2012, an audit of the Board of Governors of the Federal Reserve System and of the federal reserve banks, followed by a detailed report to Congress. Repeals specified limitations on such an audit.
By Michael Snyder – BLN Contributing Writer
Most Americans believe that we still live in a capitalist system and that free markets primarily determine the growth and development of our economy. But is that really the case? No, sadly it is not. The truth is that the U.S. Federal Reserve does a tremendous amount of central economic planning. So what makes the central economic planning that the Federal Reserve does different from the central economic planning that communist China does? Yes, in China it is the government that does the central planning and in the United States it is a private central bank that does the central planning, but other than that are there any huge differences? And if our economy is centrally planned, then how can we continue to claim that we still have a free market capitalist system?
Certainly China goes into greater detail in their economic planning, but that does not mean that the economic planning that the Federal Reserve and the U.S. government do is not similar.
After all, free markets do not set interest rates in this country – the Federal Reserve does.
The Federal Reserve also determines what the money supply will be.
The Federal Reserve is the one that decides if inflation is too high or too low.
The Federal Reserve is the one that decides if unemployment is too high or too low.
In addition, the Federal Reserve has a tremendous amount of regulatory power over U.S. banks and the entire financial system. Most Americans simply do not realize how much power the Federal Reserve has over our banks. Just last year Federal Reserve officials walked into one bank in Oklahoma and demanded that they take down all the Bible verses and the Christmas buttons that the bank had been displaying.
Like the communist Chinese, the Federal Reserve is not elected and it is essentially accountable to nobody.
Like the communist Chinese, the Federal Reserve also picks winners and losers. You see, not all financial institutions are treated equally by the Fed. For example, some have access to the Fed’s discount window and others do not.
How is that fair?
Certainly the Federal Reserve does not do all of the central economic planning in this country. The U.S. government loves to get involved in economic planning as well. For example, the U.S. government has decided that there are certain types of light bulbs that we are allowed to buy and certain types of light bulbs that we are no longer going to be allowed to buy. It doesn’t matter that the new light bulbs are far more dangerous to children or that most of us would still like to have the choice to buy the old light bulbs.
But getting back to the Federal Reserve, how “democratic” or how “capitalist” is it to have 12 unelected people sitting around a table deciding the economic direction of this country?
The truth is that we live in a system that simply does not trust free markets and that believes that our economy needs to be “managed”.
I have to admit that my thinking on these issues was stimulated when I recently read an excellent article by Vitaliy Katsenelson in which he asked the following question….
It is a fundamental tenant of American capitalism that central planning of economies doesn’t work in the long term, whether in Soviet Union historically or in China today. But I often wonder: How is the Fed’s Board of Governors – the proverbial 12 guys in a room – any different than the 24 guys in a room who make up the Chinese politburo?
Is Katsenelson not right about this?
How in the world is the Fed’s Board of Governors all that much different from the Chinese Politburo?
In both cases, a group of unelected elitists makes the major economic decisions for all the rest of us.
That certainly does not sound like “capitalism” to me.
Would the free markets really produce worse results for our economy than the Federal Reserve does?
Would America ever have gone through the Great Depression if the Federal Reserve had not been created in 1913?
Would we have experienced the financial crash of 2008 if the policies of Greenspan and Bernanke had not created tremendous bubbles in the financial system?
Would the U.S. dollar have lost over 95 percent of its value since 1913 if the Federal Reserve was not around to constantly inflate our currency?
Would the U.S. government have the largest debt in the history of the world if we were not using the debt-based monetary system imposed upon us by the elite international bankers?
Now that the total debt of the U.S. government is $14,228,193,126,138.72, it is getting really hard to deny that the federal government is drowning in debt.
Dallas Federal Reserve Bank President Richard Fisher unknowingly indicted the very system he serves when he recently made the following statement….
“If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when.”
If the Federal Reserve had never been created, and the U.S. government had been issuing debt-free currency all this time, it is entirely conceivable that we would have absolutely no federal government debt at this point.
But defenders of the Federal Reserve tell us that if not for the brilliant people over at the Fed, America would be an economic basket case by now.
In case anyone has not noticed, Federal Reserve Chairman Ben Bernanke has a very long track record of incompetence. Nearly every major judgment that he has made since taking over that position has been wrong. If one of us could go down the street and appoint the manager of our local Dairy Queen as the Chairman of the Federal Reserve, it is very doubtful that person could do a worse job than Bernanke has done.
Unfortunately, most Americans do not understand this. Most Americans are still convinced that “the greatest economy on earth” will just keep roaring along forever. Most Americans are spending and partying as if everything is going to be just fine.
Sadly, as Richard Daughty recently pointed out, most Americans will not wake up and realize just how bad our economic problems really are until it is too late….
In fact, to use an analogy, the economy is like a group of overpaid people, milking the government for every dollar and benefit they can get, on a chartered airplane that has been certified as “unsafe,” where one minute everybody is having fun, drunk as skunks, laughing and telling dirty jokes, and the next minute the plane is plunging out of the sky, out of fuel, one wing is in flames, the engines are dead, the entire electrical system is kaput, and, worst of all, the beverage cart is completely empty of cold beer and those little bottles of different kinds of tasty liquors. Uh-oh!
Most Americans have become so “dumbed down” that they still won’t even understand what is happening even after the economy has collapsed. Newsweek recently found that 63 percent of Americans do not know how many justices are on the Supreme Court and 29 percent of Americans cannot even name the current Vice-President.
America today is rapidly degenerating in many of the same ways that the Roman Empire once did. Tens of millions of Americans are lazy, slothful and absolutely addicted to entertainment. It is frightening to see just how many Americans did not show any empathy during the recent crisis in Japan or when we started launching missiles on Libya. The following mini-documentary that was recently posted on YouTube does a beautiful job of making this point….
So is there any hope for America?
Let us hope that people wake up, because there are going to be even more economic disasters coming our way. Right now a large percentage of the American people don’t even know enough to realize what the real problems are, much less what the solutions may be.
When most Americans talk about economics, they instantly start blaming “Obama” or “Bush” and a lot of them never even bring up the Federal Reserve.
But it is the Federal Reserve that has the most power over our economy.
If Americans want to blame someone in Washington D.C. for the economic mess that we are in, the number one culprit is the Federal Reserve.
Yes, Obama, Bush and virtually every member of Congress has played a role in our economic nightmare as well. But it is the Federal Reserve that is actually “managing” our economy.
We would have been much better off if we had allowed free markets to “manage” our economy all this time, but very few Americans actually seem to still believe in free markets anymore.
The financial crisis stretched even farther across the economy than many had realized, as new disclosures show the Federal Reserve rushed trillions of dollars in emergency aid not just to Wall Street but also to motorcycle makers, telecom firms and foreign-owned banks in 2008 and 2009.
The Fed’s efforts to prop up the financial sector reached across a broad spectrum of the economy, benefiting stalwarts of American industry including General Electric and Caterpillar and household-name companies such as Verizon, Harley-Davidson and Toyota. The central bank’s aid programs also supported U.S. subsidiaries of banks based in East Asia, Europe and Canada while rescuing money-market mutual funds held by millions of Americans.
The biggest users of the Fed lending programs were some of the world’s largest banks, including Citigroup, Bank of America, Goldman Sachs, Swiss-based UBS and Britain’s Barclays, according to more than 21,000 loan records released Wednesday under new financial regulatory legislation.
The data reveal banks turning to the Fed for help almost daily in the fall of 2008 as the central bank lowered lending standards and extended relief to all kinds of institutions it had never assisted before.
Fed officials emphasize that their actions were meant to stabilize a financial system that was on the verge of collapse in late 2008. They note that the actions worked to prevent a complete financial meltdown and that none of the special lending programs has lost money. (Some have recorded healthy profits for taxpayers.)
But the extent of the lending to major banks – and the generous terms of some of those deals – heighten the political peril for a central bank that is already under the gun for a wide range of actions, including a recent decision to try to stimulate the economy by buying $600 billion in U.S. bonds.
“The American people are finally learning the incredible and jaw-dropping details of the Fed’s multitrillion-dollar bailout of Wall Street and corporate America,” said Sen. Bernard Sanders (I-Vt.), a longtime Fed critic whose provision in the Wall Street regulatory overhaul required the new disclosures. “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”
The Fed launched emergency programs totaling $3.3 trillion in aid, a figure reached by adding up the peak amount of lending in each program.
Companies that few people would associate with Wall Street benefited through the Fed’s program to ease the market for commercial paper, a form of short-term debt used by major corporations to fund their daily activities.
By the fall of 2008, credit had frozen across the financial system, including the commercial paper market. The Fed then purchased commercial paper issued by GE 12 times for a total of $16 billion. It bought paper from Harley-Davidson 33 times, for a total of $2.3 billion. It picked up debt issued by Verizon twice, totaling $1.5 billion.
“It is hard to say what would have happened without the facility, and how its absence might have affected GE, but overall the program was extremely effective in helping stabilize the market,” GE spokesman Russell Wilkerson said by e-mail.
Verizon spokesman Robert A. Varettoni said that it was “an extraordinary time,” adding that there was no credit available otherwise at the time.
Read More Here
The Federal Reserve has lowered the expectations for economic growth and is not expecting any significant change in the unemployment rate for the next couple of years:
Unemployment is set to remain higher for longer than previously thought, according to new projections from the Federal Reserve that would mean more than 10 million Americans remain jobless through the 2012 elections – even as a separate report shows corporate profits reaching their highest levels ever.
Top Federal Reserve officials project that the unemployment rate, now 9.6 percent, will fall only to about 9 percent at the end of 2011 and about 8 percent when the next presidential election arrives, in late 2012. The central bankers had envisioned a more rapid decline in joblessness in their previous forecasts, prepared in June.
Amazingly, there is no congressional response to the extended unemployment crisis in the works, and in fact it looks as if Congress is on the verge of ending what limited unemployment assistance they have in place currently.
On November 30th, insurance benefits for the long-terms unemployed will expire because of congressional gridlock, and even if Congress does eventually find a way to extend them, it will probably be for only three months. That would keep the program alive just until the Republicans, who have routinely tried to block the Democrats from extending benefits in the past, will be in control of the House and yield more influence in the Senate.
As the Fed projections reconfirm, the job market is in a long-term contraction (4+ years above 8% unemployment), which means that millions of people are being squeezed out the workforce with no chance of being reabsorbed. Based on the facts, one might expect Congress to be looking at something like S.3706, which would let unemployed people collect insurance benefits for a longer period, or some other approach to help the people who are most in need. But they’re not, and homelessness, hunger and suicide rates across the country are rising as a result.
Most of the commentary today on the new Fed projections is about what the unemployment crisis means for Obama’s re-election chances in 2012. But, the fact is, Obama, Congress and most of the people writing about the politics of this will be fine. Let’s consider what this means for the people who are suffering and start getting serious about a national response
By CHRISTOPHER S. RUGABER
Friday, August 27, 2010
WASHINGTON — The economy grew at a much slower pace this spring than previously estimated, mostly due to the largest surge in imports in 26 years and a slowdown in companies’ restocking of goods.
The nation’s gross domestic product – the broadest measure of the economy’s output – grew at a 1.6 percent annual rate in the April-to-June period, the Commerce Department said Friday. That’s down from an initial estimate of 2.4 percent last month and much slower than the first quarter’s 3.7 percent pace.
The revision follows a week of disappointing economic reports. The housing sector is slumping badly after the expiration of a government homebuyer tax credit. And business spending on big-ticket manufactured items such as machinery and software, an important source of growth earlier this year, is also tapering off.
As a result, most analysts expect the economy will grow at a similarly weak pace for the rest of this year.
“We seem to be in the early stages of what might be called a ‘growth recession’,” said Ethan Harris, an economist at Bank of America-Merrill Lynch. The economy is likely to keep expanding, but at a snail’s pace and without creating many more jobs. Harris expects the nation’s output will grow at about a 2 percent pace in the second half of this year. As a result, the jobless rate could rise from its current level of 9.5 percent.
That’s “very disappointing relative to a normal business cycle,” he said. “Usually you get a bigger bounce back.”
Still, stock futures rose modestly after the announcement as investors appeared relieved the estimate wasn’t lower as some economist had forecast.
Investors will now turn their attention to a speech by Federal Reserve Chairman Ben Bernanke, scheduled for 10 a.m., that will address what the Fed may do in response to the weakening economy.
The widening trade deficit subtracted nearly 3.4 percentage points from second quarter growth, the largest hit from a trade imbalance since 1947, the government said.
The economy has grown for four straight quarters, but that growth has averaged only 2.9 percent, a weak pace after such a steep recession. The economy needs to expand at about 3 percent just to keep the unemployment rate from rising.
Business investment in new machinery, computers and software drove much of the growth last quarter, increasing nearly 25 percent.
But much of that spending involved the purchase of imported goods. Imports surged 32.4 percent, the most since 1984. That overwhelmed a 9.1 percent increase in exports.
Consumers spent a bit more in the second quarter than previously calculated. Their spending rose at a 2 percent annual rate, above the 1.6 percent estimated last month and slightly higher than the first quarter’s 1.9 percent. The revised estimate was largely due to higher electricity and natural gas usage, the Commerce Department said.
Economists expect many other supports for economic growth to fade. Federal government spending and the housing sector bolstered the economy last quarter, but housing has slumped again and will likely drag growth down in the third quarter. The impact of the federal government’s $862 billion stimulus package is also projected to taper off this year.
There are few other signs of strength. Even business investment is expected to drop, as a report earlier this week showed that business orders for capital goods fell in July.
The government’s GDP report measures the economy’s output of goods and services and covers everything from autos to haircuts. Friday’s report is the second of three estimates the government makes each quarter.