(https://twitter.com/DeficitOwls/status/931268199114510336)
From our library: Former Banker: The Fed Is NOT Run By Private Shareholders.
Former Banker: The Fed is NOT Run By Private Shareholders
Warren Mosler, former banker, discussing “ownership” of the Federal Reserve. Many people believe that the stock that banks own in the Fed proves that it’s a private organization, operating for profit of its shareholders. This is simply not true. The Fed was created by Congress, given its mandate by Congress, and all its profits above statutory outlays go to the US Treasury.
The “shares” in the Fed do not convey ownership nor are they transferable. The dividend is a fixed interest rate, therefore even if stockholders could influence policy, they have no incentive for the Fed to make more profit (in fact they have incentive for it to make *less* profit because this generally means higher interest rates).
There are many quotes of Fed staffers saying this, some under oath. From Chairman Marriner Eccles: “One of your favorite complaints is that the Federal Reserve Banks are owned by private bankers and that the Board of Governors in Washington as well as the Federal Reserve Banks are operated in the interest of private bankers. These charges will not stand up under examination. The Board of Governors, the members of which are appointed by the President and confirmed by the Senate, is a public body. As to the Federal Reserve Banks, you rest your case upon the slender point that the stock of the Federal Reserve Banks is owned by the member banks. Congress specifically provided for this, as well as for the rate of dividend and Congress can change the nature of the stock and the rate of return at will. This so-called stock ownership, however, is more in the nature of an enforced subscription to the capital of the Federal Reserve Banks than an ownership in the usual sense. The stock cannot be sold, transferred or hypothecated, nor can it be voted in accordance with the par value of the shares held. Thus the smallest member bank has an equal vote with the largest. Member banks have no right to participate in earnings above the statutory dividend, and upon liquidation any funds remaining after retirement of the stock revert to the government. You greatly exaggerate the significance of this so-called stock ownership. At the current dividend rate of six per cent, it involves the payment annually of approximately $8,000,000 to more than 6,000 member banks, and could be done away with altogether without important effects except to put an end to an illusion created by you and others in the minds of some people.” (https://goo.gl/rgd7bv)
From Bruce MacLaury, Former President of the Minneapolis Fed and Deputy Secretary of the Treasury: “First, let’s be clear on what independence does not mean. It does not mean decisions and actions made without accountability. By law and by established procedures, the System is clearly accountable to congress—not only for its monetary policy actions, but also for its regulatory responsibilities and for services to banks and to the public… Nor does it mean that the Fed is independent of the government. Although closely interfaced with commercial banking, the Fed is clearly a public institution, functioning within a discipline of responsibility to the “public-interest.” It has a degree of independence within the government—which is quite different from being independent of government. Thus, the Federal Reserve System is more appropriately thought of as being “insulated” from, rather than independent of, political—government and banking—special interest pressures.”
(https://goo.gl/l0Migk)
Here’s former Chairman Bernanke telling Congress under oath that the Fed will do whatever Congress tells them: https://youtu.be/pH2RLObp41o
Add to that Mosler’s account that his bank had “shares” in the Fed yet this gave him no policy influence.
Plus due to the nature of Fed and Treasury operations, it’s necessary for them to be in near-constant communication. More about this here: https://goo.gl/uPqIDf
The Fed is a public/private hybrid, chartered to operate in the public interest. The Board of Governors, which oversees everything the Fed does, is clearly a public body (with their pay fixed at the level equal to that of a Cabinet Secretary). The remaining Fed employees, while technically considered “private,” are also chartered to operate in the public purpose (with their pay decided by the Board of Governors).
That doesn’t mean the Fed does a good job or that it’s decisions aren’t heavily influenced by financial lobbies. They’ve enacted tons of bad policy and the bias towards banks is clear. But it’s not because they’re operating for shareholders, but rather through the same ways by which the rest of the government is bought by banksters: groupthink, tribalism, lobbying the President/Congress to appoint friendly Governors, and forming cozy relationships with regulators. This is typical “institutional decay” flavor of corruption, not “shadowy conspiracy” flavor. More discussion of this: https://goo.gl/5Kkz60
Bideoa: https://www.youtube.com/watch?v=QjgQwkfK8MQ
2017 aza. 16
Gehigarriak
(i) Bizitza estandarraz
(https://twitter.com/DeficitOwls/status/912901863955197952)
From our library: The Dollar Dropped 95% Since 1900…But Standard of Living Rose 1000%.
The Dollar’s Value Dropped 95% Since 1900…But Standard of Living Rose 1000%
Warren Mosler, on with Steve Grumbine of Real Progressives, discussing the drop in value of the US dollar over the last 100 years. Often libertarians and other folks like to point out that the purchasing power of $1 (typically relative to gold) has declined by around 95% in 100 years. However, Mosler makes a few replies.
First, this is an implied inflation rate of about 3% per year, which is not far off from the official government target of 2% per year. So if the people think the government’s inflation target is too high, they’re welcome to petition their democratically elected leaders to change it.
And second, while it might be true that $1 buys less, this completely ignores everything else in the economy that’s changed since then! Real wages are far higher, meaning each hour of your labor buys way more than it did 100 years ago. Standard of living is around 10 times higher. Dollars can buy technology that didn’t even exist 100 years ago, making life dramatically better.
A one more point in reply that Mosler didn’t mention: interest rates over the last 100 years have been generally above or close to the rate of inflation. So as long as your money was in basically any form of savings other than under your mattress, you not only didn’t lose value but gained it. People are upset because if you had $1 in 1900 then you’d need $95 today to match the purchasing power, but if you had put that $1 in the stock market in 1900, then you’d have over $300 today.
Data on standard of living, as measured by GDP per capita: http://visualizingeconomics.com/blog/…
Bideoa: https://www.youtube.com/watch?v=WqxB775qnP4
2017 ira. 26
(ii) Eta Txina? Aren’t We Financial Slaves To China?!?
Warren Mosler on what it means that China buys our debt. China accumulates dollars at their Federal Reserve account because we run a trade deficit with them, so they get dollars when we buy stuff. They could sit on these dollars and do nothing, but they’d prefer to earn interest, so they purchase US Treasury bonds which are essentially savings accounts at the Fed. These bonds are constantly maturing, and we are constantly paying them back, billions of dollars a week, by transferring the dollars from their savings account back to their reserve account. That’s it. We benefit enormously from this situation: we get real goods and services out of Chinese labor instead of American labor, and they only end up with numbers on an account statement. If China decided they didn’t want to hold dollar-denominated assets anymore, then they could spend the dollars to buy stuff. If they buy real stuff, then that pushes up American employment. If they buy other currencies, then this could put downward pressure on the dollar’s exchange rate, which would cause our exporters to hire more people.
Bideoa: https://www.youtube.com/watch?v=vW3J5LBVfGc&feature=youtu.be&list=PLZJAgo9FgHWajc5BdOP8e75eddFmWhtzh
