STAFF NEWS & ANALYSIS
Ben Bernanke's Fed Transparency … Transparent Ploy?
By Staff News & Analysis - September 24, 2012

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.

Beginning of the End? Fed Cannot Account for $9 Trillion

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.

Fed Lies Unravel … Bank Board Gave US$ 4 Trillion in Loans to Its Own Institutions

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.

After Thoughts

Ones that are gathering.

Posted in STAFF NEWS & ANALYSIS
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