Let Central Banking Lose Its Franchise, Not Its Independence
By Staff News & Analysis - September 03, 2012

At Jackson Hole, a growing fear for Fed independence … Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank's hard-won independence and undermine confidence in the nearly 100-year old institution. That was the pervasive sentiment among economists gathered at the Fed's annual monetary policy symposium in Jackson Hole, Wyoming. – Reuters

Dominant Social Theme: If we don't have a central bank, what have we got?

Free-Market Analysis: Here at the Daily Bell, we have simple questions that we ask regularly about central banking: How much money is enough, and how do central bankers know it?

The answer is that central bankers DON'T know how much money is too much. Only the market can inform us of the volume and value of money.

The market can do this two ways: via the pricing of gold and silver and the pricing of competitive currencies.

These two money facilities, probably initiated together, can provide us with the market signals to let us know how much money needs to be in circulation.

The system we have now is one of monopoly fiat tender. Taxes are paid in monopoly paper money and gold and silver are not minted by the government and therefore are hard to place in circulation.

The system is stacked toward the use of paper ticker money printed by what is essentially a monopoly central bank.

In the US, the central bank is the Federal Reserve, and what makes this Reuters article especially questionable is that the citizens of the US fought hard against the imposition of such a bank for 150 years.

It was only when some of the richest men in the world dressed up in disguises and took a train to Jekyll Island that the outline of the modern system of money fixing was planned and refined.

Because that is what it is.

Central banks fix the price and volume of money. It is almost always too much, causing first a dramatic credit boom and then a terrible bust.

There is no way that the top men and women in central banking do not know this. Thus, in a sense they are engaged in a conspiracy to bankrupt the West. In fact, since there are now 150 central banks around the world, the top men and women controlling these banks are in a conspiracy to bankrupt the entire globe.

But we know this already. The top bankers apparently report to a handful of central banking families. These families use the proceeds of central banking to fund world government. This power elite controls the media, military, politics, education and healthcare and runs governments around the world. Reuters, which produced this article, is one of the controlled media facilities.

And thus the article is a mélange of fantasies. It only goes to show how dishonest the mainstream press really is. Here's some more from the article:

Against the dramatic backdrop of the Grand Teton mountain, many said a closely- contested presidential race has turned the monetary authority into a political football.

"I do fear for it a bit if the election comes out that way, especially if some of the more radical voices, that happen to be Republican voices nowadays, get reelected," said Alan Blinder, Princeton economics professor and a former Fed vice chairman, adding that historically opposition to the U.S. central bank had come predominately from the left.

"There's a lot of hostility," said Blinder, who was appointed to the Fed by former president Bill Clinton.

The primary topic of conversation at the rustic mountainside resort was whether or not Fed Chairman Ben Bernanke and his colleagues would deliver another round of monetary stimulus soon.

But, when probed on the issue on the sidelines of the meeting, many participants voiced concern about the heated political rhetoric aimed at the Fed, including a bill that would audit the conduct of monetary policy that is gaining increasing traction among Republicans.

Republican presidential nominee Mitt Romney has said the Fed should be audited and that he would not reappoint Bernanke, himself a Republican who was originally picked for the job by George W. Bush, to a third term when his current one expires in early 2014. Still, he has pledged to respect central bank independence.

The Fed is already subject to regular audits, but congressman Ron Paul's bill would remove an exemption for monetary policy deliberations.

For some observers, that pressure is already affecting the Fed's behavior, preventing it from pushing more aggressively for stronger economic growth following the sharp blowback received back in 2010, when policymakers announced their last large scale bond purchase program …

Ironically, the complete political gridlock that characterizes U.S. fiscal policy has left the Fed in the difficult position of being "the only game in town."

Of course, the Fed is NOT the only game in town.


Central banking need not exist.

It creates havoc. Its loss would be everyone's gain.

Imagine a world in which money was what you made of it. You could find it and dig it out of the ground. Or you could create it via barter and fiat presumptions if others were willing to accept your formulations.

Imagine a world of gentle deflation. Imagine a world of variable regional interest rates. Imagine a world in which, when your region entered a business slump, you could move somewhere else to find prosperity again. What's wrong with a world like that?

It's now come out that Ben Bernanke and a tiny group of men around him disbursed some US$16 TRILLION around the world to salvage the financial system in 2008. They claimed these were short-term loans but that apparently, most of these loans were never repaid.

It was a giveaway of US$1 trillion! That's why we often write the US dollar reserve system died in 2008. You can't print that kind of money and expect a viable system.

Eventually, at least some of that money will circulate, creating tremendous price inflation. The system may not have died formally in 2008 but it sure as heck will die once all that money starts to circulate.

But there are larger issues, as well, that have to do with morality. We've been writing about this for years.

What do Donald Trump, Warren Buffett and Bill Gates all have in common? They're basically broke. Bankrupt. If the Fed hadn't kited US$16 trillion, almost every single mogul in the world, every single bank and many industrial companies as well would have been flattened by the great credit crunch.

These people are not necessarily big brains. They are not financial geniuses. They have retained their fortunes only because they were lent billions by the Fed that they never paid back. The financial system itself in the modern era is the biggest beneficiary of socialism of all.

Reuters can post articles about the hard-won independence of central banking and the need for monetary policy to remain independent. But these are just lies, dominant social themes of the power elite. The system doesn't work.

It never has worked. It never will work. It is just an excuse for a handful of people to control all the world's wealth under the guise of enlightened central planning.

It's worse in a way than the USSR. At least people understood the system in place there. They've only just begun to understand it here, thanks to the Internet and what we call the Internet Reformation.

At Jackson Hole, meeting with other central bankers, Bernanke defended policies and claimed that by printing money the Fed had created several million jobs. In fact, only people can create jobs, many times with tiny amounts of capital.

The article quotes Susan Collins, professor of economics at the University of Michigan's Gerald R. Ford School of Public Policy, as stressing the "dangers of political interference in monetary policy of either stripe."

She tells Reuters that, "Compromising that [central banking independence], maybe not immediately but over the medium- to longer-term, would have some really unfortunate consequences."

We can see here that Collins and Reuters have cleverly moved the issue away from the viability of central banking to the question of who should control it.

In fact, no one should be able to fix the price and volume of money. Not government. Not bankers.

After Thoughts

It should be done away with.

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