What has taken place around the country over the past 3 weeks is extraordinary. Americans are waking up to what this country has become over the past few decades. There are many signs, chants and causes one can see and hear at Zuccotti Park. Some of these causes are specific. Some of them are things I have not thought about. But it is heartening to see people of all stripes come out and take a stand for what they believe. However, there is one particular cause I have been familiar with for years that is downright threatening to OWS: the crusade to end the Federal Reserve. This does not mean that I am a fan of the Fed or think Alan Greenspan and Ben Bernanke should wield the type of power they do. The Fed has had a major hand in our financial crisis. But the kids who are out chanting “End the Fed” do not know the Trojan Horse of an idea they are embracing. Hopefully, the following analysis will put the “End the Fed” cause into context.
The internet has been the major media outlet in getting the message of OWS out. But well before OWS, the internet has been a haven of counter-cultural values. All of these values are on display at OWS now, but they have been on the internet for years. This includes a healthy number of websites dedicated to theories of lizard people running the world, the Illuminati, Bush planning 9/11 and the idea that the Federal Reserve (established 1913) is responsible for all the poverty and oppression we have now. Their talking points can be summarized turgidly as follows: in 1913, President Woodrow Wilson created the Federal Reserve, which puts fiscal policy in the hands of a few bankers. Those bankers are anonymous and private, effectively giving them control of monetary policy in the U.S. They have used this power to print money, which causes inflation. Going off the gold standard in the 1970s gave more power to the Fed to play games with a free-floating currency. Therefore, we must “End the Fed” because it is a “private” bank and go back on the gold standard so bankers will not be able to control the country’s monetary policy. There are variants of this theory making their rounds on the internet but, basically, that is the argument.
Many “End the Fed” types blame central banking on wild business cycles. However, we had wild business cycles before the Fed. The second largest economic depression in U.S. history was in 1893, when there was NO central bank in the U.S. The United States went into a “Panic” (what they called depression in the 1800s) under President Van Buren, who was in office after Andrew Jackson had killed the Second Bank of the U.S. These facts alone should show that business cycles are not the work of central banking.
Another favorite talking point is that our currency is “fiat”, meaning it only has value because the government says it does. This is code for “our money is really only worth the paper it is printed on”. We should go back on the gold standard so our currency has some real value. There are many problems with this argument. First, ALL money is fiat, whether it is backed by gold or not. Saying you want the gold standard back is just saying you want the government to say that gold has value as a currency again. You really have no problem with fiat money. You just want the government to make gold fiat as well as paper. Second, our money is not worthless. It is backed by the productive capacity of the U.S. economy. Essentially, American paper money has value as long as there is enough collective faith that America will continue to produce things when we wake up tomorrow. This would be the same exact state of affairs with a gold standard. If America’s economy falls apart, gold will be worthless as well. What good is your gold if there are no stores or factories in which to use it?
Finally, there is the argument that the Fed is responsible for the high rate of inflation we have seen recently. The “End the Fed” argument basically says the Fed just prints money which causes inflation. This is only half true. The Fed has in fact printed more and more money and this has caused inflation. But why have they done this? Listening to “End the Fed” partisans, you would think it is out of sheer malice and a desire to enslave the people. However, the Fed has been printing money to cover our mounting national debt, a debt that has been mostly incurred under two Republican Presidents: Ronald Reagan and George W. Bush. It is our debt that has caused inflation. The Fed is just trying to keep up with the dizzying pace at which our debt has increased.
The reason for our most recent bouts of inflation have been due to rising oil prices, among other things. This is interesting, since there has been no shortage of oil nor any increased demand for oil. The reason we are all paying more for oil is because of speculation. The commodities market was largely deregulated under Bush 43, allowing firms like Goldman-Sachs to dump tons of money into oil futures. This is the very same argument Matt Taibbi makes in his book Griftopia. Blaming the Fed exclusively for inflation allows Wall Street off the hook and acts as a block to seeing how entire high finance’s grip on the economy is.
The question is, if people with a basic knowledge of American history know this, why doesn’t the “End the Fed” crowd know? Because, instead of reading Gordon Wood, H.W. Brands or other legitimate historians, they listen to Congressman Ron Paul and radio show host Alex Jones. Those guys interpret history for their followers. The gist of the Alex Jones (who used to be an aspiring Rush Limbaugh, right-wing politics and all) zeitgeist is that Jews have always controlled the world and the Fed is “secret” and “private” because Jewish bankers are pulling the strings (like the Rothschild family, a familiar target of the “End the Fed” crowd). Jewish control also explains why American foreign policy has protected Israel. However, if these young people knew just a little history, they would know this is just another incarnation of an old idea that has been used to persecute Jews in the past. The Spanish Inquisition accused Jews of eating babies behind closed doors, Alfred Dreyfus in France was falsely accused of being a traitor to his county in the late 1800s and Hitler blamed the Jews for the Great Depression. Jews are stereotyped as cheats, shysters, money-grubbing, scheming and downright evil. They have been stereotyped as such from the start. Egyptian and Babylonian slavery, The Inquisition, pogroms and the Holocaust should be enough evidence for these people that the Jews in fact have not controlled the world behind closed doors.
The Fed is, in fact, a quasi-government institution. It goes like this: the Constitution gives Congress the power to print and coin money. The Congress has tinkered with various methods of doing this throughout history. In 1913, Congress passed the Federal Reserve Act which established the Federal Reserve, a central bank consisting of many member banks, mostly private. You can think of it as Congress outsourcing their Constitutional power to print money to the Federal Reserve. By lending member banks cash at the discount window, the Fed pumps money into the economy. And, yes, many times it does print money. At the same time, it sets interest rates. Conventionally, the Fed raises interest rates when they want to slow the economy down and lowers them when they want to stimulate it. Alan Greenspan was notorious for keeping interests rates low, giving banks further incentive to speculate. But Greenspan, and every other Fed chairman, is appointed by the President and approved by Congress. And many times, when the Fed has printed money, it has been to keep pace with the soaring national debt. So, the Fed is not totally private.
However, there is an argument to be made for the Fed being more transparent, especially after finding out current Fed chair, Ben Bernanke, gave out $1.2 trillion in secret loans to Wall Street.
But to assert that the Fed is private is really code for “those Jews are pulling the strings”. Jews are part of the 99%, not the 1%. Many Jews are at Zuccotti Park and know the problems we face as a nation. Sooner or later, these “End the Fed” youngsters are going to show their true, anti-Semitic colors and it will put a major black eye on OWS. The media will jump all over it and paint everyone protesting as a Jew hater.
Our problems run much deeper than the Fed. Over the past 35 years, Americans have been working longer hours for less money, CEOs are making 400 times what their employees make, financial services have gone from 5 to 35 percent of our total economy, the media has fallen into the hands of 4 companies, the prison population has quintupled, the public sector has been privatized, unions have been broken and we find ourselves in a “War on Terror” that has destroyed our rights and the lives of people around the world. If you think all of these problems are the work of the Fed, you’re too simple to take seriously. But, the fear is that the media will take them seriously and push every other concern into oblivion again. We have worked so hard to get some attention on the injustice that pervades this nation, do not throw it away on single-minded opinions propagated by REPUBLICANS especially, but ignorant people in general.
Please check the follow-up to this post: “End the Fed” (addendum)