Op-Ed: Fed Up With the Fed
Abuses of power, lack of transparency order of the day.
The average American doesn't know much about the Federal Reserve. Most Americans believe it's part of the government. They're wrong; it's a privately held corporation owned by its stockholders, the largest banks in the United States.
But which banks own shares in the Federal Reserve is a secret. Why? And does this explain why Citigroup (C), Bank of America (BAC) and JPMorgan (JPM) are being propped up by the Fed?
The history of national banks in the United States has been controversial since the signing of the Declaration of Independence, and the Constitution unequivocally states that only Congress has the authority to coin money. So how did the Fed come to have the authority to run the printing presses - and drive up inflation?
The government began keeping official track of inflation in 1913, the year the Federal Reserve was created. The CPI on January 1, 1914 was 10.0. The CPI on January 1, 2009 was 211.1. This means that a man's suit that cost $10 in 1913 would cost $211 today, a 2,111% increase in 96 years. This is a 95% loss in purchasing power.
The average American might say that prices always go up - so what's the big deal about inflation? The CPI was 30.9 in 1964. Today, it's 211.1. This means that prices have risen 683% since 1964. The only problem: Your wages haven't risen at the same rate, even using government-manipulated CPI. Using a true CPI figure, average weekly earnings are 64% below what they were in 1964. This explains why a family of 5 could live well with only one parent working in 1964; now, with both parents working and prodigious debt, the average family can't even approach that standard of living.
In the years following the creation of the Federal Reserve, inflation skyrocketed as the US sought to finance its participation in World War I. After President Nixon closed the gold window in 1971, rampant inflation was the norm until the early 1980s, when Paul Volcker, the only independent Federal Reserve chairman in its history, put a stop to it.
According to the Federal Reserve's own website, their duties fall into 4 general areas:
1. Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
3. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
4. Providing financial services to depository institutions, the US government, and foreign official institutions, including playing a major role in operating the nation's payments system.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter