News & Analysis
Ben Bernanke's Fed Transparency ... Transparent Ploy?
Under Ben Bernanke, a more open and forceful Federal Reserve ... In what might be his final years as chairman of the Federal Reserve, Ben S. Bernanke is transforming the U.S. central bank, seeking to shed its reclusive habits and make it a constant presence in bolstering the economy. The new approach would make the Fed's policies more responsive to the needs of the economy — and likely more forceful, because what the Fed is planning to do would be much clearer. A key feature of the strategy would be producing a detailed set of scenarios for when and how the Fed would intervene, which would mark a dramatic shift for an organization that throughout its history has been famously opaque. – Washington Post
Dominant Social Theme: The Federal Reserve is maturing with the times.
Free Market Analysis: More Fed promotions; it never ceases, of course. Control money and you control society. And those "in charge" have a vested interest in ensuring the social solvency of the Fed.
We were on record years ago with the idea that the Fed had lost its moral authority in this Internet era. And we see no reason to revise our view. The Fed and its leader, Ben Bernanke, are flagellated every day by both the mainstream and the alternative media, deservedly so. And yet in the 20th century this was not the case.
Of course, there was no outlet in the 20th century. The mainstream press controlled pretty much all the information when it came to central banking and thus there wasn't much launched that was critical of the current system.
That all changed in the 21st century with what we call the Internet Reformation and now information on the real role of central banking in the world's larger economy is fairly well disseminated.
As a result, much has come to the fore that those directly and indirectly involved in the current money system probably would rather have kept concealed. Bernanke's solution, counterintuitive though it might seem, is to counterattack the flow of information (and resultant disillusion) by offering MORE information.
Bernanke, surely one of the most high profile and controversial of Fed chairmen, has the idea that he wants to show the Fed has nothing to hide. His approach to damage control seems to be the "limited hangout" – offer a version of Fed "transparency" to do away with criticism that his institution is secretive. Here's some more from the article above:
Bernanke has already pushed the Fed far along this path. The central bank this month pledged to stimulate the economy until it no longer needs the help, an unprecedented promise to intervene for years. That's a big change from the Fed's usual role as a curb on inflation and buffer against financial crises.
"It's a re-imagining of Fed policy," said John E. Silvia, chief economist at Wells Fargo. "It's a much more explicit commitment than people had thought about in the past. It's a much stronger commitment to focus on unemployment."
As the Fed becomes more forceful and interventionist, it creates new risks for itself. Bernanke's actions have provoked tough criticism from conservatives in Congress, who have proposed more closely regulating what the Fed can do. The Fed takes pride in its independence, but becoming more interventionist may plunge it deeper into the political maelstrom ...
"Stating that we expect to keep a highly [stimulative] stance for policy for a considerable time after the recovery strengthens is an important reassurance to households and businesses," Charles Evans, president of the Federal Reserve Bank of Chicago, said in a speech last week.
Bernanke is also studying the idea of declaring that the Fed will boost the economy until unemployment reaches a specific target or until inflation takes off. Some Fed officials have suggested the central bank keep on stimulating until unemployment reaches 7 percent or inflation rises to 3 percent; others have proposed Fed action until unemployment reaches 5.5 percent or inflation rises to 2.25 percent.
The Post itself offers pushback to Bernanke's newfound ideas of openness, as we can see above. Providing rationales for what the Fed does only deepens criticism by certain elements of the political class as well as the alternative media.
Of course, Bernanke may believe he doesn't have a choice. Under attack over its lack of fundamental communications, the Fed now faces a counterattack by Congressional reps inspired by Congressman Ron Paul's (R-Tex) various "audit the Fed" bills.
As these audits have already turned up surprising but depressingly predictable information, we can probably expect more over time.
The real problem the Fed faces is not its "dual mandate" or even the strategies it implements to "solve" economic problems it has created. No, the real problem is that the Fed is a fundamentally dishonest institution.
The Fed was created to supposedly ensure that the West's economic system would not stumble into bankruptcy for lack of liquidity. But having so much of the world's liquidity at its fingertips, the Fed has converted the world's economic system into its own franchise.
Now, when the Fed is performing its liquidity function, it is protecting its OWN interests – not the interests of the larger society. Those running the Fed may protest they are one and the same or that the liquidity function itself is more important than conflicts of interests.
But it is the appearance of conflict-of-interest that is partially fueling the Fed's current unpopularity. No matter what Ben Bernanke does, he is still left with a perception within the larger public that it is not right for a handful of men to control trillions while most people are struggling to get by on hundreds or thousands.
On an economic level, of course, such control of money by the few leads to a kind of price-fixing. The more the Fed does over time to remove the previous damage, the more problems are caused in the long run.
But it is this fundamental unfairness – revealed by a flood of articles on the Internet – that is the real problem. As people have come to understand how "monopoly" central banking really works, they instinctively reject it.
Those involved with central banking have always known this. The undemocratic nature of the process is fairly indefensible. This is why proponents try to dress up the paradigm with quasi-scientific terms like "quantitative easing."
But in the end it is neither scientific nor democratic. It is the product of an elite Money Power that will cling to its privileges and impossible wealth for as long as it can.
Eventually, we have predicted, things will change. There is a new money system coming because people won't tolerate the current one forever. It's been exposed. It's run its course. Even Bernanke's solution, to reveal more about the Fed, is just a non-starter. The more people learn, the more uncomfortable they get.
Bernanke's perspective is either purposefully dysfunctional or hopelessly naive. Either way, the Fed's reputation won't get a whit better. Transparency for central banking is like scrubbing a window for a better view of a storm. Or in the case of the Fed ... storm clouds.
Conclusion: Ones that are gathering.
Posted by Don from the Republic of Lakotah on 09/24/12 11:04 AM
"a perception within the larger public that it is not right for a handful of men to control trillions while most people are struggling to get by on hundreds or thousands."
Says it all most eloquently.
"Bank Board Gave US$ 4 Trillion in Loans to Its Own Institutions"
The meaning of the word "loan" changed a while back. It now means "giving away dollars without any expectation of payment in return."
Enough of logically twisting QE into stimulus! The Fed simply creates dollars to give away and nothing more.
Posted by Rrust on 09/24/12 09:28 PM
Mildly off-topic: Hugo Salinas Price has posted a new article on his site today. --Worth a look-in.
He has placed fiat money high on the Ultimate Pedestal of Evil… right where it belongs.
--a few excerpts:
[[ …Modern war means destruction and death for masses of people. When WW II was over, the destruction began to heal. The cities were rebuilt, the survivors went back to what they had been doing when the war broke out: they returned to earning their livings with work, doing what they knew how to do. Normality returned, generally speaking.
But consider the effect of fiat money on the whole world.
The whole productive structure of the world has been overthrown. The factories that have vanished in the developed nations cannot be rebuilt…
Fiat money has destroyed humanity's normal way of life; a way of life in which men and women could find their places and were thankful to have them. That old way of life is gone; the old attitudes toward life and work have been erased.
This is destruction many times worse than the worst destruction of any war.
That is where we are today. This is what fiat money has brought to the world. Fiat money is the child of the arrogance of human intellect, which has sought to invalidate the laws of human nature which have regarded the precious metals as money for thousands of years, and sought to substitute an intellectual construct for the real thing. Now we are going to pay for that arrogance… ]]
Posted by Bischoff on 09/24/12 09:36 PM
DB: "But it is the appearance of conflict-of-interest that is partially fueling the Fed's current unpopularity. No matter what Ben Bernanke does, he is still left with a perception within the larger public that it is not right for a handful of men to control trillions while most people are struggling to get by on hundreds or thousands."
BISCHOFF: That's exactly what happens when gold is no longer part of a redeemable currency system. When savers can no longer redeem their currency for gold as a store of value which they can save or invest, they are then forced to invest irredeemable currency income at an interest rate that is dictated to them by a tiny group of people at the FOMC of the Federal Reserve.
How well that has worked out, we have seen. The Fed's interests will always lie with the large banks. It keeps them afloat by lowering, and then lowering the interest rate again, and again. The process of constantly lowering the interest rates favors the banks, while at the same time it destroys capital intensive businesses, because their liquidation values are increased.
On the fiscal side, the US Congress constantly creates annual budget deficits in order to monetize the debt into irredeemable Federal Reserve Notes. This is done through FOMOs an interest expense continuously added has been compounding the interest due. This conpounding of interest debt for forty years has led to a run-away interest expense which the Fed is trying to curtail through its QE program.
While the Fed can use its monetary policy to some extent to influence the domestic economy, it has to primarily keep its eye on the international currency system, as not to disturb the various floats.
Call the Fed dishonest, or call it anything else you want, but a small group of monetary "geniuses" at the FOMC cannot possibly rival the genius of the free market which sets the rate of return for savings.
Posted by Danny B on 09/26/12 12:01 AM
The pump-and-dump mechanism is well known. It worked fine in Argentina and has been released worldwide. Most people don't understand that a lot of the currency that the FED doled out to Europe was to service dollar-denominated debt. It's understandable that the FED [bankers] don't want any more banks to collapse.
I believe that the FED wants to preserve their FRN. It has served them well for a long time. I'm certain that the FED doesn't want a worldwide collapse. The system is so inter-connected that next-to-nothing would survive.
DOT COM was a good idea that got carried to far.
Same for the housing bubble.
Derivatives were a good idea as long as there was some honesty in lending.
Dan Denning has a good article proposing that the pump-and-dump model has been applied on TOO LARGE a scale.
Click to view link
There have been several articles claiming that Bernanke's actions have been pure panic.
Reportedly, obummer doesn't want the results of the Greek fiasco released until after the election. That's not very reassuring that something like Greece could cause problems here. Their debt is only 20 billion.
Click to view link
There is even suspicion that the FED is responsible for the latest gold-tungsten fraud.
Click to view link
Who knows what shenanigans we'll see in the next 4 months?