End the Fed

No government agency should have that kind of power.

I've always avoided reporting on the Federal Reserve. I know it's more important than much of the stuff I cover, but it's so boring. How can I succeed on TV reporting on the Fed? Fed chairs even work at being dull.

Alan Greenspan said he tried to be obscure because he didn't want to spook markets. He called his obfuscation "Fedspeak." It's a far cry from the clarity of his language -- and principles -- when he was young and a disciple of libertarian Ayn Rand.

Outgoing Fed Chairman Ben Bernanke and his likely successor, Janet Yellen, are almost as boring.

But we should watch what they do. The Fed can destroy your savings and your future. The current crew of Fed bureaucrats has raised the Fed's balance sheet to a stunning 4 trillion dollars.

As Sen. Rand Paul's father, retired congressman Ron Paul, put it, "No secret cabal of government officials should have the authority to create money out of thin air."

He makes a good point. For three decades, Ron Paul was virtually alone among politicians in questioning the Fed. But now there are more.

Jim Bruce's documentary "Money for Nothing" is a great beginner's guide to the Fed. Bruce points out that the last two Fed chairmen, appointed by both Republicans and Democrats, have quietly increased central planning of our economy. Government now controls more of our economy than ever before. This is not a good thing.

The Fed was created to prevent bank runs. It would be a lender of last resort and create stability.

Yet 16 years after the Fed's creation, the Fed's low interest rates fueled the Roaring Twenties and led to the greatest stock market crash in history. Then the Fed's tight money worsened the Depression.

I'm told they learned from their mistakes. For four decades after that, the Fed usually kept increases in the size of the money supply gradual, steady and predictable. Except for one nasty period, inflation has been kept in check.

But now the Fed is charged with two sometimes clashing missions: preserving a stable currency and reducing unemployment.

There's great pressure for the Fed to time these decisions just right in order to avoid economic downturns and -- some argue -- to make current political officeholders look good. Increasingly, investors and Wall Street analysts obsess over what the Fed will do, instead of paying attention to inventions, productivity and real wealth-creation.

The Fed, created to shore up capitalism, has become an instrument of government economic management not so different from a socialist planning board: a tiny handful of powerful people attempt to fine-tune the entire economy. Its main mission has become continually goosing economic activity through infusions of new cash to maintain the illusion that good times will never falter.

The result isn't stability, but one economic bubble after another.

The Fed's manipulations fit well with President Obama's "stimulus spending" efforts. But neither seems to do the trick. This post-recession "recovery" is among the weakest ever. Japan's central bank tried the same stimulus for the past 15 years, since its economic crash. That didn't work either.

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  • Jordan||

    The clown show must go on.

  • Jquip||

    It's a common scam based on the idea that obligations are assets. Soon as you get rid of that idea you start labeling present expectations of future income from a debt instrument the same way you label a psychic friends hot line: For entertainment purposes only.

  • Rufus J. Firefly||

    Is the Fed a government agency or a private entity?

  • Libertarius||

    It is a distinction without a difference. Counterfeiting money, manipulating interest rates, destroying economies, and creating misery is what it is regardless of who is the technical owner of the government bank doing it.

    The Fed is about as private as the USPS or the IRS. Think in terms of essentials; this argument about "nationalize the Fed" is mindless noise.

  • Rufus J. Firefly||

    Andrew Jackson must be losing his mind down below.

  • Will Nonya||

    it's chairmen is appointed by the president and confirmed by the senate, sounds like a government entity.

  • Alice Bowie||

    I say teh opposite of Stossel.

    We should keep the FED and get rid of FDIC banks.
    If you want your savings/checking guaranteed with no risk, Bank with the FED. If you want higher rates and are willing to take risk, play the market.

    So, the FED lends Chase $$$ at .25%
    Chase turns around and lends out at 15%.

    Can I be Chase? No, it's a private membership as to who can go to overnight window.

    The government should offer a guaranteed safe deposit.
    And, it can.

  • Will Nonya||

    Why should the government offer a guaranteed safe deposit?

  • nikolowry@gmail.com||

    The 3 largest shareholders of the Federal Reserve are Bank of America, Morgan Chase and Citibank. I'm not an economist, and can't claim to be an authority on the matter. But it makes no sense to me why the Government doesn't print and issue it's own debt free fiat money, rather than borrowing it.

    This cycle of never ending debt is putting us on place for modern-day serfdom

  • Alice Bowie||

    What do you think would happen if everyone started living debt free.

    That is, save to buy a used car.
    Only rent
    No credit cards
    etc...

  • nikolowry@gmail.com||

    I'm 27 and cut up all my credit cards 4 years ago. I'm nearly done paying off my student loans. I weigh and thoroughly think through the value of the purchases I make now.

  • sasob||

    a disciple of libertarian Ayn Rand.

    Jesus H Christ! Rand a libertarian? What are you trying to do, Stossel? The way she must be spinning in her grave, it's going to throw off the space/time continuum of the universe!

  • Black&Yellow||

    I was wandering who was going to catch that first.

  • sam the man||

    I was wondering who was going to catch this.

  • 2Sirius||

    Yeah, I've been hiding under my desk ever since I read that line. Is it safe to come out yet?

  • advancedatheist||

    I suspect that some wealthy people have backed the children's crusade to end the Federal Reserve because they view it as a crony capitalist deal which went to the "wrong" gang of cronies instead of going to their gang. Mark my words: If we live to see the abolition of the Fed, after the chaos that causes, we'll see something like it re-established, but with a different bunch of well connected rich guys running it.

  • Will Nonya||

    It's unlikely that the fed will ever go away, maybe a compromise would be to restore some of congress' power and require their approval for the FED printing and lending limits etc.

    Let the weasels in suits manage the day to day operations then come to the house for permission to do as it likes. That at least adds some transparency and the possibility of their actions being checked.

  • Tony||

    Stossel, something being successful in a way that contradicts your ideology means your ideology is flawed, not the thing that's working.

  • Libertarius||

    If you think the Fed is "working", then shut the fuck up about the "distribution of wealth".

    You're a piece of shit, and the clock is ticking for your fake money welfare state. What cannot last, will not.

  • AdamJ||

    ^this.

    All Fed does is encourage debt and inflation, thus shifting all the wealth to those with first access to money and credit. The rest of us dummies get left holding the bag.

  • Tony||

    Ben Bernanke has repeatedly said that the major problems in the economy must be dealt with by Congress. But insofar as the Fed has the ability to prevent recession, it's working--unlike Congress, whose nihilist charlatan contingent doesn't seem to give the slightest shit about the state of the economy.

  • ReadyKilowatt||

    The biggest problem with the federal reserve is the hubris of the people running the show. They continue to believe the American economy can be monitored, modeled and molded to their desired outcome.

    And their desired outcome is that we get screwed while they get rich. Just remember when Bernake complains about deflation (or not enough inflation), he's telling you your paycheck is too big. He wants you to work for slave wages because if you actually move up in the world his "hard work" to get his place of stature isn't as valuable. Thanks to technology we have better lives than any 18th century king, and the elites like Bernake don't like it. So they manipulate the currency (making sure their buddies all get first dibs at the freshly printed dollars), blame "evil speculators" and businessmen for driving up costs of goods, and fail to explain the system in their government run schools.

    And meanwhile, the government gets their dependent class and chronically unemployed to keep them in power (and give them even more power). The banks get their credit addicts. People keep less of what they earn, and what they lose goes up to the elites instead of helping out their fellow man.

    It's a self-feeding system, until it's not.

  • AdamJ||

    He complains about deflation because the whole system is based on credit/debt and is predicated on rising prices at all times. Think housing bubble but in every sector of the economy.

    The amount of credit dwarfs the money supply (which is why we haven't seen inflation after all the QE), and if the credit markets take a hit, down goes everything. It'll be quite a show.

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  • Concerned Citizen||

    Article 1 Section 10 - No State shall make any Thing but gold and silver coin legal tender in payment of debt.
    This has not been revoked or amended. It's the law. The Fed is private, one of their employees admitted it to me. The Fed gave us inflation. It was created to make some rich, and the rest, poor. It has been a huge success.

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