Has the Fed Gone Too Far? (Part I)

Is Surging Inflation the Last Straw?

We have been champions of common-sense Constitutional policies for a very long time: sound money, limited government, responsible budgets.   

Along the way, we have often felt lonely pointing to the Federal Reserve’s role in enabling the opposite: fraudulent, unreliable money, gargantuan government, and uncontrolled spending.  For a brief shining moment after the mortgage meltdown and the housing bust, with millions losing their homes and jobs, it looked like Americans might be noting the hidden hand of the Fed behind the destruction and the egregious bailout of the Fed’s banking cronies.  The best evidence was the thousands of voters that greeted the Ron Paul presidential campaign across America with signs and chants calling for the end of the Fed.

But it didn’t last.  The media didn’t like it and went to some bizarre lengths to limit the movement’s exposure.  For example, when Ron Paul easily won the Fox News poll after one of the Republican debates, one of the network’s leading hosts quickly disavowed its own poll.  

We would like to make clear that we are not some Ahab obsessed with the Fed white whale for personal or for no good reasons.  The Fed’s operations are a mystery to most people and therefore few understand its reach into every nook and cranny of American life.  We have described its economic distortions and damage many times in many ways in these comments.  But for today we will reduce it to its bare essential:  Since money is half of every financial transaction, and the Fed regulates the conditions of money and credit, the Fed has a hand in everything. 

Everything. 

But now the Fed may have gone to far.  Because inflation is surging and it has the economy at the breaking point, even some of its usual supporters may be scurrying away to avoid blame for the coming calamity.

The latest and most unexpected example is a Frontline documentary that aired Tuesday night (7.13.21) on PBS.  Since PBS is government television (the Corporation for Public Broadcast receives hundreds of millions of US taxpayer dollars every year), we were a little surprised to see its recent documentary, “The Power of the Fed.”

The website Wall Street on Parade headlined its preview of the program this way: The Federal Reserve Has Radically Changed from a Central Bank to a Bailout Kingpin.  Americans Just Haven’t Paid Attention – Until Tonight.

Here is its preview:

“The Fed’s radical makeover of itself began in December of 2007 when the Fed decided, on its own, that it had the authority to secretly pump out trillions of dollars in cumulative loans to prop up the mega banks on Wall Street, as well as to the foreign banks that were on the other side of Wall Street’s hundreds of trillions of dollars in derivative trades. The Fed secretly ran that program through at least July of 2010 according to the eventual audit that was conducted by the Government Accountability Office…. 

“The Fed’s latest massive bailout operation began on September 17, 2019, months before there was a case of COVID-19 anywhere in the world. The full scope of this operation and other bailout programs remain a dark secret at the Fed, casting a pall over investors’ confidence in the transparency and stability of the U.S. financial system.

“Frontline writers and producers James Jacoby and Anya Bourg… will now become part of a rarefied group of individuals who have mustered the determination to cut through the Fed’s insidiously cultivated armor of Fed-speak and the preposterous structure that allows it to create trillions of dollars of money electronically out of thin air for bailouts, with only feigned oversight by Congress.”

The program does not get everything right; its producers are not students of monetary history and of prior episodes much like today.  Of course, it doesn’t mention that Constitutional money, gold, and silver, were meant to preclude exactly what the Fed has done.  Or that now that it has done what it has done, that you can still protect yourself from its paper and digital money folly.  

But it does give some of an idea of how close the Fed’s grandiose risk-taking has us to the brink of tragedy.  

In our next post we will cite just a few specific things in the program that miss the mark and others where its aim is true.

You can watch the entire program HERE.