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Uncovering The Fed

UNCOVERING THE FED In the early 20th century, a financial crisis led panicked citizens to withdraw all their money at once, damaging banks. By 1913, Congress responded with the Federal Reserve Act, creating 12 regional banks acting as a federal bank to deal in local and global affairs with both private banks and the federal government. Some say the Fed was meant to create a balanced economy, while others argue its purpose was to inorganically manipulate free enterprise, rescuing banks that we'd be better off without. Is the Fed still doing its job today? What secrets are still kept from us, and how are the Fed's actions impacting our economy? THE MAIN PLAYERS ...But will not commit to specific steps, and feels no policy changes are necessary unless the economy begins decline Says the Fed will continue to take appropriate action for economic stimulus... Describes the Fed as "the collusion of big government and big business to profit at the expense of taxpayers" Believes bank bailouts were unfair and damaging to the economy "I would feel much more comfortable if Congress would take some of this burden from us. Authored a book entitled End the Fed, supporting its abolition BEN BERNANKE RON PAUL Texas Congressman and Former Presidential Candidate 2nd Term Fed and FOMC Board Chairman COMPLAINTS AGAINST THE FED BEN BERN ANKE IS PUBLIC ENEMY NUMBER ONE." -Peter Schiff Overly secretive Should be fully audited Encourages bad, risky investments by softening the blow of bad decisions by big banks and big companies Makes the pain of recessions worse by covering up and exasperating problems that the market would correct on its own Caters to banks and financial insiders Systematically allows the value of Causes economic bubbles by artificially favoring certain sectors of the economy money to decrease as a result of inflation: FED ENCOURAGED THE HOUSING for 100 years before the Fed, money BUBBLE, EVEN tended to retain or "FATHERED" IT gain value over time Discourages people from saving (because interest rates are too low) Doesn't hold government spending in check ... has allowed government spending to get out of control FED'S EFFECT ON THE VALUE OF MONEY Creation of the Federal Reserve $1.20 $1.00 (1913) $.80 $.60 $ 40 $ .20 $.00 1776 1806 1836 1866 1896 1926 1956 1986 EXPLANATIONS BY THE FED Stability of financial institutions foundational to Softens the blow of Needs level of recessions and stability of the economy secrecy in order to maintain independence from political pressures and make wise, prevents depressions tough decisions Keeps inflation in check HOW TRANSPARENT IS THE FED? REPO 1975: Report on monetar policy 2x/year Even into the 90s it was difficult to REPORT consider the Fed transparent, as it rarely remarked about monetary policy or decision-making 1979: FOMC first semiannual economic 1983: First "Beige Book," summarizing economies of each Federal Reserve District projections 1994: First FOMC statements detailing changes in the federal funds rate 2002: FOMC roll-call vote target results included in Minutes post-meeting statements 2000: First statements following every meeting; first risk assessments to obtaining objectives 2004: Minutes release PEPORT REPORT quickened from 6-week delay to 3 weeks 2007: FOMC economic projections begin to be released 4x/year PEPORT REPORT FEDERAL FUNDS EFFECTIVE RATE 6.24 5.02 The federal funds rate is at a record low 0.1 2000 2005 2010 Intended to decrease loan interest and kickstart the suffering economy The Fed will keep the rate low through late 2014--at least BUT HOW MUCH WILL THAT HELP US? UNEMPLOYMENT and our CURRENT ECONOMY Unemployment has dropped rapidly, but economic growth hasn't risen proportionally Currently there are 12.7 MILLION unemployed workers, If every available job were filled by someone currently unemployed.. but only 3.7 MILLION available jobs 2 OUT OF 3 unemployed people still wouldn't have a job Nearly 43% of our unemployed population In Q1 2012, the GDP grew just 1.9%- -it would need to be at least 4% to have been searching for work for 27+ weeks reach adequate employment levels quickly --THE HIGHEST RATE IN 60 YEARS DISCOUNT WINDOW LENDING GETS OUT OF HAND During this program, foreign banks borrowed even more than domestic banks: Belgium's Dexia: $31.5 billion (1/4 of all money borrowed via discount On December 5, 2008 alone, the Fed loaned banks/financial companies window) $1.2 TRILLION! That's 6,000x more than the pre-crisis average of $200 million It's 1,200x more than the early crisis average of $1 billion per day per day CONSEQUENCES: Savers and investors have lost money to the banks The TARP program, designed to fix the economy since 2008, currently owes taxpayers $400 BILLION $118.5 BÄ°LLION in government losses due to the FDIC's loss-sharing agreement with healthy banks THE FED DIDN'T EVEN INCLUDE THESE LOANS IN ITS ESTIMATION OF TOTAL 2008 PAYOUTS! 28-day single-tranche open-market operations (ST OMO): -$195 billion to companies like MorganStanley, JPMorgan, Deutsche Bank and most of all, Credit Suisse! Morgan That's tantamount to lying about your income on your taxes-- Ca Su JPMorgan O you can't just pick what to leave out! According to the Fed, all loans have been paid back with interest... but the extent of the secrecy remains cause for concern. THE GOLD STANDARD Gives the government WHY WE LEFT THE more flexibility for dealing with GOLD STANDARD economic recessions Allows the government to spend more than it has on hand in case of emergencies BENEFITS OF THE GOLD STANDARD Non-arbitrary Holds government spending in check with upper limits A tangible, limited resource that sets real spending ceilings REDUCING THE FED'S INFLUENCE WHAT WOULD THINGS LOOK LIKE Interest rates would be People would IF THE FED HAD save more higher LESS INFLUENCE? and spend less Government would spend within its People would spend within their means People would invest more means There would be decreased consumption America would produce and manufacture more Government Trade deficit would shrink would shrink HOW DO WE FIX A BROKEN FED? Get Jamie Dimon, CEO and Board Chairman of Uphold higher lending standards JPMorgan Chase, other big bankers, and employees of money laundering banks off the Fed boards Boot --don't let corporations pose as banks for bailout Bernanke money Ensure the Fed doesn't bend its own rules for personal interests Make it work for the economy as a whole-not just the banks Consider a return to the gold standard (removing the clout of monetary policy) Even if the Fed is "fixed," how can we be sure the same secrecy and shady operations won't happen again? Provided by: SOURCES: http://articles et/29997602 1 new-york-fed-banks-bid-credit-suisse

Uncovering The Fed

shared by micahsparacio on Aug 16
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The secrecy of the Federal Reserve has caused people from both ends of the political spectrum to take note and there are increasingly more and more calls to reform this institution for more accountability.


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