The Fed and Common Sense

This entry is part 5 of 31 in the series 2011B

We have spent a lot of time covering the gold standard for a good reason. Most people who want a return to some type of gold standard are reasonably informed and are thinkers. They understand the importance of having a sound monetary system, of not overspending and the genius incorporated into the original Constitution. Having one of these on your side is more potent than a dozen of those who formulate their views from media soundbites.

Therefore, I have presented what I consider to be logical information on what will and will not work as far as gold as a standard goes. I will add a few more things as we continue. For instance, the market value of gold could be used as a standard to formulate the value of a dollar to increase the stability of the current or future fiat system.

We’ll discuss more later about how the dollar could be backed but for now we’ll continue on the ten points that are under consideration to create a sound money system. The gold standard was merely the first consideration. Let’s take a look at the second.

(2) Eliminate the Federal Reserve.

A great number of books, articles and treatises have been written on this subject. Since I am trying to present ideas and information that may be new to readers I will only cover this briefly as a simple Google search will bring up a plethora of material.

A good deal of the information is either from conspiracy theorists or from those just who loath the organization and want it abolished.

It didn’t help that it was created during the progressive era of Woodrow Wilson and passed in 1913, the same year that instituted the Income Tax. Then it was supposed to create enough malleability with currency so a depression could not happen again yet it was powerless to either prevent or cut short the greatest depression in our history.

In addition, there is something about its name that really get’s its critics blood boiling. It is called The Federal Reserve. They say it is called such to deceive us into thinking that it is an arm of the government, but they maintain this is a big lie because it is a private corporation ran by greedy bankers. Some believe the insiders make an unfathomable amount of wealth that is hidden from the public and this is why it has never been audited.

Ron Paul has always been suspicious of the Federal Reserve and has introduced H.R. 1207, The Federal Reserve Transparency Act, which would require it to be audited and force it to operate in the light rather than the dark.

Some critics give a distorted view of the Fed when they stress that it is a private business, as if it were entirely divorced from the government and keeping all the profits. It might more accurately be called a quasi governmental organization for all members of the Federal Reserve Board, including its chairman and vice-chairman, are chosen by the President and confirmed by Congress. The government also sets the salaries of the system’s highest-level employees. This doesn’t happen with a purely private business.

In addition the U.S. Government receives all of the Fed’s annual profits, after a statutory dividend of 6% on member banks’ capital investment is paid. The Federal Reserve returned $78.4 billion to the U.S. Treasury in 2010. This was an increase of $31 billion over 2009 because of earnings on stocks that they bought up to pump up the market.

Congress has oversight with them and can change the rules at any time, but overall the Fed has, at present, pretty much unrestrained freedom in dictating the rules for America’s currency and banking systems.

So if the Fed must return profits to the U.S. Treasury, and their salaries are controlled by Congress, why do conspiracy theorists paint the Fed as a sinister entity that is stealing America’s prosperity with insider bankers becoming wealthy beyond the imagination?

Part of the reason is that some critics do not fully understand the linkage between the government and the Fed. But for those that do the problem is the Feds’ secrecy. Yes it is true that a set amount of profits go to the government and their salaries are set by them but because they can operate under the radar with so much secrecy it is suspected that insiders have giant expense accounts and channel funds in directions that will enrich them.

The Fed also plays the stock market to assist the economy and who knows how many employees trade with insider knowledge.

If the Fed were fully audited on a regular basis and all its dealings were available to the public then we could know the truth and we could lay the basis for a more honest and stable economy.

Another problem is that the Constitution gives Congress the authority to create money. Many feel that it is wrong for them to have given away this power to a secretive semi private organization. Thus there are many calls for the elimination of the Federal Reserve and to ether give the power to create money back to Congress or directly to the people. We’ll talk more about this later on.

(3) The third suggestion to strengthen our economy is a balanced budget amendment.

This sounds like it should be a no-brainer, but is it? Why hasn’t Congress ever taken this seriously?

There is a great mystery surrounding the fact that Congress just cannot balance their budget or even come close to living within their means. They are like a teenager who has been given a large credit card and then he decides to blow the whole thing on everything that feels good to him. Then when the limit is reached he comes home to Daddy (the taxpayer) and pleads for more money.

The mystery is this. The people we elect are the among the best and brightest of us, yet they act like stupid teenagers in their job performance, especially as far as spending money goes.

These people are not stupid as rocks so why are they fulfilling their jobs with the competency of drug addicts higher than a kite waiting for their next fix?

It appears that our representatives are either out of their minds or just plain hate America and all taxpayers.

We know that this is not literally true, but we also know there has to be a reason for such self-destructive behavior, but what that is seems elusive. It is amusing to see Joe Q. Public of average intelligence watch these screwups and exclaim in exasperation, “What’s the matter with these guys? They are spending millions on golf videos for the Irish, elevator attendants to push buttons for lazy congresspeople, research to see if volunteering is helpful, millions for unneeded golf courses for military brass when we are short changing the brave soldiers who are risking their lives for us, bridges to nowhere projects and the biggest boondoggle of them all – a nearly trillion dollar stimulus that was used for political payback costing $228,000 for each job created and causing untold misery for many others who lost jobs. Are these guys out of their minds?” asks Mr. Average? “I know better than to waste money like this. Why do they not know?”

There are two reasons for this apparent stupidity. The first was mentioned previously in chapter three and that is our President and Congress see, as part of their job description, that they are supposed to spend money to please voters. Since every employee wants to do a good job then our elected officials feel they have to spend lots of money to receive praise from their employers, the taxpayers. Unfortunately, this illusionary job description is reinforced when they bring home the bacon to their home state and the few who are on the receiving end give lavish praise whereas the ones paying the bills are too busy working to protest much. Representatives therefore receive the lopsided idea that they are performing well by sinking us into unprecedented debt.

The second reason for the stupidity is addiction. Now if a person is not exposed much or has little access to smoking or drug use the chances are that he will not become addicted. But if everyone around him is a user then it becomes difficult to resist and most will join the crowd.

Spending money can be an addiction  like drugs. There are many shopaholics that just cannot resist spending more money than they can afford.

Congress is a club where most members are spendaholics and when a person who is not an addict arrives he is met with two major temptations. First he is given trillions of dollars to spend. Maybe in the past the most he has blown has been a couple grand, but now we’re not only talking millions, but thousands of millions and even millions of millions – or trillions.

If spending money created a high for him in the past then being a member of Congress will blow his mind.

The second problem that sucks him into addition is he is surrounded by spending addicts who gleefully spend money like they are little gods with unlimited power.

Anyone with a weak will who goes to Congress doesn’t have a chance. He will become addicted.

Will he vote for a balanced budget or term limits? Not likely. He may talk a good game but when it comes down to taking action the true addicts will side with keeping their power to spend intact.

And what would happen if we did pass a balanced budget amendment? Does a mere law prevent an addict from getting his fix?

Not really.

Did the constitutionally mandated gold and silver standard prevent us from throwing it out the window and then spending money we didn’t have?

No

Even so, unless we cure the addiction of Congress and the Presidency they will find a way around any terms of a balanced budget amendment just as they have other limitations that have been there in the past.

In a health emergency it may be necessary for a non addict to take some drugs. Even so, during a war or national emergency it may be necessary to spend extra money. Because of this and the willingness of the addicts to break their own laws a balanced budget amendment may cause as many problems as it solves.

One thing we agree on is that our elected officials must run this country as efficiently and with as much common sense as a wise family. They may borrow money now and then but they operate their budget on common sense principles. Government must do the same and we the people must be the last line of defense in making sure they comply.

Read This entire series. Here are the links.

Copyright 2011 by J J Dewey

Copyright by J J Dewey

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9 thoughts on “The Fed and Common Sense

  1. You wrote:

    “Did the constitutionally mandated gold and silver standard prevent us from throwing it out the window and then spending money we didn’t have? No”

    I do not believe you know what you are talking about here.

    lwk

    1. In the Constitution we read:
      [No State shall …] make any Thing but gold and silver Coin a Tender in Payment of Debts; …
      Art. I Sec. 10 Cl. 1

      This gives us a mandated gold/silver standard that we have thrown out the window several times. where am I wrong?

      1. When we had some sort of gold/silver standard we never approached the levels of debt we have today. However one may criticize the gold standard, it was impossible I think to reach the levels of debt we have today under such a standard.That is my point.

        The only thing that makes our current level of debt possible is a fiat monetary system completely unrestrained to any standard except Congressional fantasy.

        lwk

        1. Correct, but that just agrees wit what I have said and does not indicate I do not know what I am talking about.

          Even though we were on a constitutionally mandated gold standard – this did not stop us from throwing it out the window and borrowing fiat money. World War I was an example and the Great Depression was another. Then world War II and Nixon were others. You are correct if we had stayed on the standard, but no law will keep us on it.

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