Congress and the Fed - addict and enabler

Jim Summers, an organizer for End the Fed, files this report in the Nashua Telegraph about, among other things, the symbiotic relationship between Congress and the Federal Reserve.

The effects of our financial house-of-cards collapsing are everywhere: home foreclosures, unemployment, stock values cut in half, retirement savings lost. The cause, however, is a bit harder to discern as we are distracted by false leads (Fannie Mae and mortgage brokers) and side shows (Bernie Madoff and AIG bonuses).
To solve this case, we must remember to always ask the next question: What enables all of these sideshows? What economic force allowed for the housing bubble, too-big-to-fail financial firms, the trillions of bailout dollars and endless government deficit spending?

If the boom-bust cycle is ever to be stopped, we must walk past the sideshows, go inside the big-top and observe the main event. That event is a magic show called money creation, where, like pulling a rabbit out of a hat, the Federal Reserve creates money out of thin air.

This is a very good high-level summary of the situation that is relatively easy to understand, even for the uninitiated.

Particularly in light of last week's bold action by the House Financial Services committee to adopt the much stronger Paul/Grayson amendment to audit the Fed, it's natural to wonder how many supporters in Congress fully understand how the Fed "enables" them.

To wit:

All politicians know that raising taxes is a career-ender, but more handouts for their constituents is a career-extender. As legislators become addicted to spending, they know the money well will never run dry. Can’t balance the budget? Need a monetary fix? No problem, the Fed is a licensed counterfeiter always ready to deliver the goods.

This is why Congress allows the Fed to carry on in secret with its unfettered expansion of the money supply. Congress is a money addict and the Fed is its enabler.

Injecting liquidity into the market would be one thing if this credit were backed by capital, but just the opposite is true.

With no gold reserves, all of our money is created out of debt. This is why every bill in your wallet says “Federal Reserve Note,” not “silver certificate” or “gold certificate.”

Modern dollar bills are instruments of debt, not of capital. Ben Bernanke is unquestionably a learned individual, but he must have been absent the day his professor discussed the definition of capital.

The discussion then turns to the nature of capital and of today's gathering of protesters at Federal Reserve offices around the country.


Here's a report from yesterday about protests in Mineeapolis today - more timely news can be found at this Google news search.