Skip to content

Something Is Inflated, All Right…

December 17, 2014

I hear the Federal Reserve Board is poised to make an announcement concerning its predictions or determinations on the financial market soon. I don’t pretend to understand the subtleties of the world financial markets, or have any great skill with math, and I don’t presume to comprehend fully the required skills of those on the Board; however, the Fed bothers me for several reasons and it may be necessary to air my concerns so (hopefully) someone can correct my flawed thinking in how this organization operates—and the way it effectively controls our economy.

Who makes up “the Fed” anyway? A bunch of names and faces on a distant committee, as far as any regular citizen generally knows. I don’t recognize any of them, and it seems their roles bounce around annually to every 14 years, depending on what task they have been assigned to within the twelve financial districts of the United States. (That sort of makes it difficult for those without the capitalistic savvy to know who is doing what, by the way.) The “Fed”—with its vaunted authority tacitly included in such a strong, terse name mimicking that of the national level of government—is a regulatory agency under the auspices of the U. S. federal legislative branch, thus legitimizing its status as a “.gov” website to some degree. The Senate confirms its leading members, so in theory, the Board is accountable to the citizen via how we staff the Senate. We all know that is a farce, though.

The website for the Federal Reserve is not forthcoming on exactly why it has legal or moral right to dictate terms of our banking, like with interest rates on loans. Under the link “regulatory and supervisory responsibilities,” one would expect to find some sort of listing or claim to why the Fed can do such things. Instead it leads to a FAQ page, which has nothing about such legitimate rights to the type of guidance it imposes on banks of the U. S. It has everything to do with day-to-day questions, as it should, but it should still also have some mention of what concerns me. It seems to me there should be some statement as to why American banks and financial institutions should heed the advice of the Federal Reserve at all, and there is none here. I did hear it was established by President F. D. Roosevelt and was initially, at least, a bunch of foreign interests who dictated terms to our financial entities. Is that correct? If so, is that right?

How does the Fed control the U. S. economy? From what little I have actually been taught on this at any level of education including graduation with a bachelor’s degree, I think it is a board overseeing management of money, lending, and related functions of the American market in twelve different parts of the country. It reviews the markets, determines what it thinks is best for everyone, and announces its expectations. That is the extent of its executive or legislative authority. Then it seems all the banks set rates befitting such expectations.

Let’s rephrase that so the reader understands the danger here. An independent agency touting itself simply as “the Fed,” rather than a less critical moniker like this advisory entity like it is reputed to be, studies the market and ostensibly tries to determine the most beneficial choices for our financial market corporations, and in theory, following these determinations is the right thing for banks and the like to do. The threat from such a practice, however—and threat is the right word here—lies in the fact I never see any financial institutions noticeably deviate from the Fed’s recommendations.

That means an independent agency (if not still constituted by foreign interests, to say nothing of the likelihood it is run by selfish interests of individual banks and wealthy people across the country) effectively dictates what our banks and such should do, and our economy is calibrated to the expectations, potentially the rash whims, of this one group. There is no recourse if all the major financial institutions follow suit all the time.

There should always be a plan B. I know of no law against banks making interest rates of their own volition, and I wonder if the economy wouldn’t do better if a few did on occasion. I certainly cannot understand why the Fed would have a target of 2% inflation if it has the interests of the common citizen in mind. The rate of inflation over the last 70 years is exactly the reason we are returning to a reinvented serfdom; no single income can manage a household on basic rent and utilities anymore, unless it happens to fall in the tax bracket currently occupied by a small minority of Americans who also happen to own Congress. Why is a stable value of the dollar not good enough? For that matter, deflation may make investors nervous in the short term, but it would do wonders for the consumption of manufactured goods and actually help the rest of us make headway in our own little lives. Curious the Fed has expectations exactly countering that…

No one agency without any direct legislative or executive authority should be followed so religiously without at least a declaration of why it has such revered authority. Even with it, even should it be legitimate unto the people, there must be a fallback should this entity be wrong. I see no evidence of a reserve to the Federal Reserve, or an effective plan to fix the situation if the Fed is so wrong it tanks the economy (directly or indirectly). Stimulus packages were all but useless, and bailouts did nothing for consumer spending or long-term improvement of things like unemployment rates. All those billions of dollars did were line pockets, from which some things do rain down—but that isn’t rain.

If anyone would, correct me in these dire thoughts. I would love to be wrong about this. It seems to me we are poised rather precariously, in financial terms, hinging all things on the Fed. It may work, and it may be as good an institution as it surely believes itself to be, but I still think something is missing. That could have disastrous effects on those of us who can’t afford to fly off to a summer home and wait out the consequences.

Advertisements
Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: