Nobel Winner Stiglitz Calls Fed Corrupt
By Staff News & Analysis - March 16, 2010

The U.S. Federal Reserve's framework is a corrupt one in that its regional banks are managed by board members who are officers from the very private institutions they are designed to govern, says Nobel economist Joseph Stiglitz (left). Stiglitz, also a former chief economist at the World Bank, says if a country had come to him looking for aid while running a central bank in such a manner, alarm bells would have gone off. "If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure," says Stiglitz according to the Huffington Post. "It's time for us to reflect on our own structure today, and to say there are parts that can be improved." The New York Fed presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase, according to the Huffington Post. Lawmakers are currently negotiating a bill that would overhaul parts of the country's financial regulation. – MoneyNews

Dominant Social Theme: Might as well admit it.

Free-Market Analysis: One must consider Joseph Stiglitz someone who knows his way around the corridors of power. He was former chief economist at the World Bank and a winner of a prestigious prize for economics (one that is not actually THE Nobel prize but has the same name). His statements, reported above, are interesting for two reasons. First, they are coming from Stiglitz who is certainly an insider. Second, they are coming now.

Stiglitz is not a young man. What precluded him from speaking out in the past? Perhaps he has made similar comments, but the timing is interesting, at least. Stiglitz's statements come at a time when the Federal Reserve is under attack as it never has been before. The kinds of accusations that have been leveled credibly at the Fed recently by such free-market proponents as Congressman Ron Paul (R-Tex) include the secret (and illegal?) funding of foreign powers and even secretive money provisions for American skullduggery such as the Watergate break-in.

The Fed is in such bad odor because the Internet has exposed its conflicted inner workings to people throughout the United States for years. Viewers, however, likely did not take the Internet's presentations seriously for a long time. But the advent of the financial crisis has changed this perception. By now, even, many may have found the Internet-based free-market interpretations of the Fed's mechanisms more compelling than the dry-as-dust socialist perspectives offered in manifold university textbooks or distributed plentifully by the Federal government and the Fed itself.

Given the Fed's problems, Stiglitz's comments might look to some as "piling on." Perhaps they are. The also fit a pattern whereby various power elite insiders reconfigure the public conversation based on public sentiment and the nature of the rhetoric. Rupert Murdoch's Fox TV network may be the most obvious example of (what we consider) this sort of manipulation. Through the auspices of various commentators, the network has dramatically shifted toward conservative and even libertarian rhetoric as the free-market sentiment in the United States has become more evident and popular.

This is not necessarily extraordinarily clever or subtle, but in a pre-Internet era it was not especially obvious. In a post-Internet era it is far more obvious because there are more discussions about it and because the shifts have been so rapid and pronounced. This is in fact how savvy observers of the marketplace can determine the sentiment of the culture and the level of power-elite paranoia.

The template being followed here – generally or specifically – is one that Bell viewers and feedbackers certainly know well, the Hegelian dialectic featuring thesis/antithesis. The proper utilization of this strategy calls for the powerful, monied manipulators of society's dominant social themes to set up rhetorical poles opposed to the other. Then the larger conversation, especially the political conversation, is manipulated in such a way that one of the poles moves toward the desired objective (socialism/fascism/feudalism) while the other pole is dragged along. There is always the perception of a debate even though both poles are moving in the same direction and soon the pole that has been in opposition may occupy the ground where the other pole started.

This is what we would argue might be behind comments such as Stiglitz's. We are not in particular accusing Stiglitz of purposefully following such a strategy. He may simply have gotten out of bed one morning and felt grumpy about the Fed. But the point is, if there are other comments from the mainstream establishment that hew to Stiglitz's line, then someone inclined to track dominant social themes for sociopolitical or financial purposes might want to pay closer attention.

This, in fact is how our proposed analysis of dominant social themes tends to operate. It IS an investment strategy, not merely a fulmination (as it sometime may seem) because any preemporatory shift in the memes of the power elite signals a shift in strategy. If there are others from the mainstream adopting Stiglitz's talking points (and left-wing Congressman Barney Frank has already signaled a willingness to further investigate the Fed), then one could potentially assume that the powers-that-be have decided the Fed's authority and responsibility must bow to the rising winds of public pressure. This could have extraordinary consequences.

Indeed, words and ideas generally have consequences. And we are living in a time when words and ideas are generously dispersed – an era of information plenty. The power elite, meanwhile, fears the loss of credibility of its remaining informational assets. It will therefore enthusiastically shift the rhetorical goalposts up or down the field depending on public sentiment. No one fights the trend.

We are not fans of the Fed, nor of central-banking initiated fiat money in general. We think the current mercantilist system of central banking that the US operates under is virtually criminal – and now Stigilitz of all people has gone on the record to make substantially the same statement. In any event, the point of this article has not been to further question the mechanism of a private money monopoly operating spuriously under color of law but to point out how one can continually analyze dominant social themes and pick up potentially valuable information about the direction in which the power elite may be tacking.

After Thoughts

Is this important? Again, yes, inordinately so if you accept the reality of such an elite and its authority and influence. Given everything that has happened over the past decade – all of which the Internet has tracked in excruciating detail – we would argue that the evidence suggesting that money power is alive and well in the 21st century is overwhelming. We would also argue that the current power elite likely is having continued difficulty coping with the Internet. If so, expect more adjustments to the West's Hegelian dialectic to reflect realities the elite had no intention of creating and which have perhaps taken them by surprise.

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