When the Fed and the national debt are pictured as a terrifying bogeyman, the kids among us are so fearful they tend to wet their chinos and security blankets. But it is not really what one may think it is.
There is this accusation that the Federal Reserve “abuses” its power to print money. The use of the term “abuse” may be delusional. That the Fed’s purpose of printing “fiat” money is to satiate greed for self-enrichment, instead of say, bailing out the economy in trouble, may just be an imaginary conclusion that torments a disquieted mind.
I understand the anguish behind all these, and the need to share the light so that those in the dark could see has indeed become more compelling.
Printing a “fiat” money is not always objectionable as it may appear to the uninitiated. In the past, our cash-strapped revolutionary colonies would not have won the revolution had they not printed paper money with hardly any equivalent gold or silver reserves to back it up. This was done to facilitate trade and enhance commerce as well as to finance and continue the struggle for independence against the Crown of England. In short, it is “fiat money” that brought us to where we are now.
The hard-pressed colonies then did what the Bank of England did, like what today’s Federal Reserve had done and still doing. The Fed is just exercising the power that the American people had delegated to it through Congress … it is the people’s power to print paper money to spend for development and to revive the economy from a devastating financial crunch and economic meltdown created by conspiracies of events, unlikable virtues such as selfishness and greed and/or similar human weaknesses, if not so designed by intervening natural causes.
That power of the people to print their own money which was delegated to and exercised by the Fed is what made this nation the greatest on the planet!
Is the delegation of such power unconstitutional? It is not and has never been and will never be. People who think it is, tells a funny joke that even the ignorant are deprived of the opportunity to laugh at because the insinuation angered them. The best proof that this doubt is foolish as Don Quixote, Literature’s public clown, is that the Fed is still around since its creation in 1913, and it is here to stay.
Since the printing of money represents debt of the national treasury, “government borrowing” in this sense is not like Medusa's head that turns everyone to stone!
In this regard, for becoming too judgmental, only those who make rush conclusions with undefined intentions if not total ignorance, bang their head and break their neck when they jump into an empty swimming pool without looking.
Is there a downside to this exercise of delegated power to print more of our national currency like what the colonies did of their “colonial script” – “to borrow” to finance our wars for freedom and liberty far across the ocean and historically reaching the four corners of the globe, to build our biggest airports in the world and to construct our modern air travel infrastructure, to put up our great railways and expand our incomparable highways linking all states in the country, to erect our tallest skyscrapers and create our multibillion-dollar institutional infrastructures, and now to keep our beleaguered economy from tilting over the edge, etc. … in short for the good of the commonweal and to see to it how this nation would look like today – is there really something here we have left to be desired or something that botched us off to a permanent ruin? This is what cynics think of the Fed and our national debt which in their aching mind threatens our future.
Let’s start from what “they” think of the Fed. Of course there is always a downside to this delegated power to print our monetary medium of exchange to the Fed … a part of the over-all material and social capital costs of all what we have today. Every exercise of such power has a negative aspect, a snag if you may.
The delegated power to print/mint money emanates from one of the major responsibilities of the Fed to regulate the supply of currency and coins in order to run a stable economy. Too much of it would blow up the economy, too little of it would ground the economy. Either way, it is 9/11 the Fed guards against, just like how we look over our shoulders to spot an economic saboteur about to blow up our economy to kingdom come! It is not what the Fed would do out of vanity for “bankers” to get rich as ill-willed cynics would want the public to believe.
The Fed also administers relief to unavoidable economic foul-ups. The organization is run by less than perfect human beings. For instance, take judicial notice of the fact that corruption thrives in honesty, just as in corruption there can be also an exceptional honesty. But the system’s check and balance structure make the function of the Fed almost ideally perfect for all intents and purposes. So that operationally, it is more real than just apparent that there is nothing left to be desired when the Fed is viewed in its rightful place.
Any curious but neutral monetary specialist that studied the U.S. Federal Reserve from the academe who have no ax to grind would admit and say the way I do without any second thought. Count out politicians and followers whose delusional economics is based on hugging the limelight for political expediency. We are all in for a public debate over the importance or irrelevance of the U.S. Federal Reserve to our national economy, but not to encourage a public lie against it to foment a revolution so that a precipitous politician can rise from the ashes.
Notice carefully that the complaint of the people at the edge of their wit is louder in the outback. When the economy is sick, the remedial pill the Fed prescribes is always bitter to swallow they would rather be sick than take it. But let's live in the real world, not in the world of the Wizard of Oz.
First, too much printing of money is too much if it is indeed too much and that is when it is beyond what is necessary. But who has the expertise to decide when is it too much, or what is the right amount that is needed? Don’t say it is the complaining taxi driver and the angry gravedigger who incited to join a mass protest suddenly turned themselves into monetary experts and believed that indeed they are! It is this nation – the people themselves who thought it was the Fed that has that expertise when they collectively said so through the act of Congress … and to no one else.
Second, now what is the Fed? Is the Fed not the bankers AND the government? It is the people’s government acting through the President they elect, and Congress representing them – these are the structural components of this entity called the “Federal Reserve of the United States”.
Third, who makes the policy? It is the people themselves through Congress and the President they elected to office. By law this function goes to the Federal Open Market Committee of the Fed that directs the nation's monetary policy. Only those with insuperable doubts and precipitous intentions would say that it is the banker-party-component alone that decides to print money to satisfy their greed for wealth.
It is “they” – the people [the Fed, the Executive branch of government & Congress, not just the banker component] who decide to print the amount of money that is critically needed, acting through the Fed’s Board of Governors, thus the Fed performs a “governmental function”, not a “private” function as erroneously perceived. But the fired-up/misled angry gravediggers would want the public to believe that bankers conspire in private and decide on their own how to get filthy rich by printing a lot of useless money and lend it to brainless pigeons from whom they pirate a truckload of revenue in the form of interests! That perception of reality about the Fed is Alice in Wonderland!
In this metaphorical portrayal, the readers can see clearly that the gravediggers are cited merely as an example to represent our society’s economically disadvantaged. The sympathy to hear their grievance and to act accordingly to save them from their misery – real or imagined -- has a stronger appeal than the lie that they wittingly or unwittingly were made to believe, which in turn made them active advocates against the Fed.
At a certain point, they were even convinced that the Fed is a private institution run by “thieves”! That’s how distant the lie drew them out of reality.
Fourth, because these printed monies are “borrowing”, the quantified debt owed is definitely mind-boggling. Why? It is because the national debt owed has been translated to a staggering amount of wealth that made this nation the greatest, the wealthiest and the mightiest on the planet!
Fifth, the cynics would do a mathematical calculation to present a scenario of doom, i.e., generations to come have no future; they would be the ones to pay that mind-blowing size of existing I.O.Us which as of today reaches more than $10 trillion. It sounds serious, but this is just more apparent than real … such burden of payment will never occur. It will just remain in its nominal infamy – a “burden”.
Again notice carefully that you and I were the future generations of the debt-fear-mongers about a century ago who opposed the building of America to what it is today because in doing so it required an enormous budget available revenues could ill-afford. The alternative to budgetary shortfalls was a massive financial program of “borrowing” that could only be paid by future generations … today that’s you and me …!!
Again back to the giant projects of constructing national highways and freeways that connected America from coasts-to-coasts which resulted in fantastic economic growth never imagined before, that were supposed to “burden” this present generation when viewed from that distant past.
Did your life and mine become worse today than it was many decades ago because it was supposed to have been “burdened” by “debts” [the “borrowed” cost of development]? Compare yourself to those who lived life in the past riding on horseback because our present transportation infrastructure then was just a figment of the imagination. Did this so-called “burden” turn us into fish on dry land as cynics would want us to believe?
Or on the contrary, did life not even become better now than it was before? We must be realistic to admit that cynics could be deadly wrong as their ancestors have been in such a grave error when they propagated the “truth” out of a lie that the world was flat. #
© Copyright Edwin A. Sumcad. Freedomsphoenix.com access January 23, 2009.
The writer is an award-winning journalist. Know more about the author by reading his published editorials and feature articles or you may e-mail your comment at email@example.com