Executive Summary

• The Federal Reserve is a faux government entity that controls the US and other economies.

Introduction

The US Federal Reserve or the “Fed,” like nearly all central banks, is not part of the government it creates money for. It pretends to have broader social responsibilities (such as a dual mandate of keeping inflation and unemployment low, but in reality, it is run by many domestic and foreign private banks for these interests of private banks. This is why it constantly promotes asset bubbles, as private banks make a great deal of money on asset bubbles. This is why trying to explain what the Fed does in terms of public service does not make sense. Policies like QE that are said to do one thing are actually a subsidy to banks. The public good aspect of QE is not relevant to the Fed.

Why Bankers Propose that Central Banks Must be “Independent”

This argument is essential in prying the central banking function and the money creation function, which naturally resides with the government, to a private entity controlled by private banks.

Question from Terra America: That explains the insistence on the financial class here and abroad in insisting on an “independent” central bank. It means that instead of serving the public interest, it serves the interests of the banking class. The hoped-for transformation of commercial banking into long-term industrial banking was not achieved. Can we imagine the global economic system without Federal Reserve today? If yes/no, why? As David Kinley’s book for the National Monetary Commission pointed out a century ago, nearly all the financial functions performed by the Fed already were performed by the national Treasury. In more recent times, Milton Friedman and his University of Chicago colleagues suggested that the entire Fed could be reduced to a single desk inside the Treasury. The “Chicago Plan” of the 1930s urged Treasury control, as does Congressman Dennis Kucinich’s current bank reform. There is no inherent need for a monetary agency to exist outside of the national government, except to serve the interests of the financial class as distinct from those of government, industry and labor. And the banking sector’s business plan is to load down real estate, labor, industry and the government with as much interest-bearing debt as possible. Some people in the US (especially supporters of the congressman Ron Paul) believe that the Federal Reserve is the reason of serious problems within the American financial system. Do you agree with this claim?

Michael Hudson: The Fed is a reason for serious problems, but not the only reason. Unfortunately, Ron Paul’s proposal opposes paper credit itself, whether issued by the Fed or the Treasury. He wants to return to the gold standard and clash government spending – in effect, to create an economy without government. So what he actually advocates is not only the end of the Fed, but the end of a functioning credit and tax system. The idea is otherworldly and has no possible chance of being enacted, because it would cause a vast debt default as a result of plunging prices, incomes and employment.

Source: Michael Hudson

https://michael-hudson.com/2012/03/federal-reserve-system/

The Fed’s Objective to Minimize Wages While Maximizing Asset Prices and Debt

This strategy, which is the best of all possible worlds for bankers is explained in the following quotation.

The Fed is officially supposed to perform two functions: First, to promote “price stability.” This means in practice, fight against wage inflation and preserve sufficient unemployment so that wages will not increase. The “prices” that are supposed to stabilize are the price of labor (wages) and commodity prices. Meanwhile, the Fed seeks to inflate asset prices, above all real estate prices. Under Alan Greenspan, the aim of the Bubble Economy was to inflate housing prices by enough so that homeowners could borrow the interest to pay the bankers each year, and even enough to spend on consumer goods that their stagnant wage levels were not sufficient to buy. The result was to vastly increase the volume of debt – and debt service became a rising element of prices throughout the economy. Debt-leveraged housing prices ended up absorbing about 40 percent of typical family budgets, and a rising share of corporate income as well, leaving less for spending on current production of consumer goods and capital goods.

Source: Michael Hudson

How the Fed Protected Banking from Their Misdeads and Loading up the Economy With Debt

Instead of writing down debts, the Fed made sure that no bank would lose, or even be prosecuted for the financial fraud that has risen to epic proportions over the past decade. My UMKC colleague Prof. Bill Black calls this phenomenon “criminogenic.” So in effect, Mr. Bernanke is as much a bank lobbyist as Mr. Greenspan. In this sense, both Mr. Greenspan and Mr. Bernanke were successful in steering U.S. financial policy to benefit Wall Street by loading down the economy with debt, and then using public credit to bail out the banks and pass the losses onto taxpayers.

The guiding philosophy of the Fed is to inflate prices of assets in order to expand the market for real estate loans (which account for some 80 percent of bank loans in the United States), corporate takeover loans and speculative “casino capitalist” loans for foreign-currency and interest-rate arbitrage.

Source: Michael Hudson

The Argument for Abolishing the Fed

The case is presented as follows.

The Federal Reserve System should be abolished for the following reasons: It is incapable of accomplishing its stated objectives. It is a cartel operating against the public interest. It is the supreme instrument of usury. It generates our most unfair tax. It encourages war. It destabilizes the economy. It is an instrument of totalitarianism. This is a story about limitless money and hidden global power. The good news is that it is as fascinating as any work of fiction could be, and this, I trust, will add both pleasure and excitement to the learning process. – The Creature from Jekyll Island

Source: Creature From Jekyll Island

https://www.scribd.com/doc/54912935/The-Creature-from-Jekyll-Island-G-Edward-Griffin

The Fed as the Third Private Central Bank

The Fed can be considered the 3rd private central bank of the US after the first two were abolished. Louis McFadden describes the Fed in this quotation.

“When the Federal Reserve Act was passed, the people of these United States did not perceive that a world banking system was being set up here. A super-state controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure. Every effort has been made by the Fed to conceal its powers but the truth is – The Fed has usurped the government!!”- AZ Quotes