The FED (Federal Reserve)

[Buffalo Souljah]

I am going to be doing some reading tomorrow on the role, place, purpose and history of the Fed, which I know was begun in the Wilson administration and was a decision he later regretted supporting (he considered it "the greatest blunder of his career" [sic]). I am aware that, by and large, it is controlled by big banks, big-time bankers and big corporations and there has been a movement, since the 80's (decidedly one-sided) to "regulate" it, which is now somewhat gaining steam, in light of the circumstances and the Fed's complicity/arrogance/ignorance in the wake of the global financial crisis. They're not a very popular group, so I've hear. However, no one (i.e., of us regular folk) seems to know much more than this about this shadowy, mysterious and enigmatic group chaired oh so sexily by the bearded Ben Bernanke.

Let's get a photo of him up here:


http://khalling.files.wordpress.com/2010/01/benbernanke.jpg

Hubba hubba!

Anyway, discuss!

[vyborg]

do not get confused by the problem of the property of the central banks. it is irrelevant. many are public-owned, others have shares, hence are theoretically, private-owned. this is not the point.

the central banks are a public body and the most important in the imperialist epoch, much more than the army...during non revolutionary periods.

their duties (monetary policy, supervision, payment system, economic research and so on) have a common ground: to seek the best environment for profits

[pdcrofts]

Can I suggest you include the following in your reading list?
Article15045.html from the website marketoracle (co. uk.).
There are many more similar articles on that website which claim that the FED is a private cartel. I take your point vyborg about central banks being public bodies (I thought they were too), but the articles on marketoracle seem to contend that money printed under QE ends up being owed to JP Morgan and the banksters. I'm not quite sure if it's true, but it's worth reading.

[bailey_187]

It plays a useful role in the capitalist economy, thats all.

I dont know much about the American central bank, but the English one (The Bank of England) just changes interest rates to keep inflation at 2%.

The idea that the cause of our problems is some secret cabal controlling a super powerful central bank is a right wing conspiracy theory.

[bailey_187]

money printed under QE ends up being owed to JP Morgan and the banksters.

No money was printed in quantitive easing, the government bought up bonds from banks (IIRC), to increase their "liquidity" to increase lending. So of course banks were given money, that was the entire point of QE, so they would lend more.

[pdcrofts]

Okay, first of all on the BoE:
Perhaps you will admit it's at least a part of the problem?
They set interest rates, they also print money. £200 billion at the last count. When all that money reaches circulation the effect will be to greatly devalue the pound, making the savings of hardworking people worthless. Effectively the BoE can take wealth away from the public.

Second, I'd say the point of QE is to devalue the currency, monetising the UK debt mountain. Yes, that will only happen when the banks lend more and the extra cash gets out into the wild. But it's not out yet. Hyper-inflation when it does?

[Red Commissar]

The Federal Reserve was made in the United States for the same purpose other capitalist states made theirs- to have a check on banking activities in light of an increasingly interconnected economy.

Like other attempts at regulation in the United States and other nations, it is easily manipulated by the groups they are supposed to keep in check. Aside from the Fed, there were other similar regulatory bodies such as the Interstate Commerce Commission (anti-trust) which was also gamed by the railroad companies it attempted to control.

Recently the right-wing nut jobs in America have set their sights on the Federal Reserve. The image in the OP is from such a site. While the Fed is an extension of the capitalist system that needs to be addressed, these people are approaching it all the wrong way. Why weren't they calling out the Fed in the past decade? It's obvious that their sentiment is being manipulated by the banks they think they are fighting against, being channeled into the general Obama Socialist Conspiracy™ sentiment.

There's nothing really secret about the Fed, though on account of their activities being "independent" a lot of the assets they hold are not public. If you choose to look at the activities of the Fed try to get rational and good sources, socialist in stance if you can. Other wise you risk running into the abundance of right-wing conspiracy theories.

[bailey_187]

Okay, first of all on the BoE:
Perhaps you will admit it's at least a part of the problem?
They set interest rates, they also print money. £200 billion at the last count. When all that money reaches circulation the effect will be to greatly devalue the pound, making the savings of hardworking people worthless. Effectively the BoE can take wealth away from the public.

Second, I'd say the point of QE is to devalue the currency, monetising the UK debt mountain. Yes, that will only happen when the banks lend more and the extra cash gets out into the wild. But it's not out yet. Hyper-inflation when it does?

You scare scenario of the BoE "printing" massive amounts of money, creating hyperinflation is wrong because 1)the entire purpose of the BoE is to keep interests rates at 2% (give or take 1%). 2) inflation, usually, does not hurt working class people, so long as wages rise in line with inflation. Who it does hurt is the pety-bourgeois classes with savings (the same petty-bourgeois class that cares about this whole central bank conspiracy shit, this is petty-bourgeois reactionary politics). 3) Capitalists favour stable inflation, its good for business. So to think that the BoE would act inopposition to this obvious capitalist interest is to fall to the conspiracy theory idea that the Central Banks are some rouge cabal who have usurped power. We Communists know that the reality is that its not some rouge alien element that is the cause of our problems, but an outdatted class and its made of production.

[S.Artesian]

You scare scenario of the BoE "printing" massive amounts of money, creating hyperinflation is wrong because 1)the entire purpose of the BoE is to keep interests rates at 2% (give or take 1%). 2) inflation, usually, does not hurt working class people, so long as wages rise in line with inflation. Who it does hurt is the pety-bourgeois classes with savings (the same petty-bourgeois class that cares about this whole central bank conspiracy shit, this is petty-bourgeois reactionary politics). 3) Capitalists favour stable inflation, its good for business. So to think that the BoE would act inopposition to this obvious capitalist interest is to fall to the conspiracy theory idea that the Central Banks are some rouge cabal who have usurped power. We Communists know that the reality is that its not some rouge alien element that is the cause of our problems, but an outdatted class and its made of production.

While I agree that the hyperinflation scenario is not likely, that's not because the entire purpose of the BoE is to keep interest rates at 2 percent. In addition, inflation can hurt the working class, as wages almost never keep up with increases in the costs of food, energy, housing, clothes, medical care during periods of inflation; it can hurt the petit-bourgeois as interest rates rise, but at the same time it effectively devalues the existing debt the small capitalists carry; and big banks love to moan about inflation as they are the ones hold the debt now being repaid with devalued dollars

The hyperinflation scenario is unlikely because the QE has had little impact on the actual amounts of money circulating in the economy. In the US, [as in Europe] amounts actually in circulation have not expanded, but have stayed locked up the vaults of the banks, or on deposit with the central banks etc.

The most important thing to keep in mind about central banks is they don't control the economy, the capitalist economy controls them. Volcker, for example, credited with the "Volcker Recession" in 1981 that brought inflation to a halt hardly created the recession as overproduction was so severe that growth had virtually come to a halt when OPEC jacked the price of oil again. What Volcker did was give the monetary expression to the need of capital to attack living standards, wage rates, of workers in the US and all over the world, and... to begin to liquidate the accumulated fixed assets which had so threatened rates of profit.

It was through the "quantitative tightening" that we got the asset-stripping of leveraged buy outs-- the first forays into collateralized debt obligations-- the transfer of wealth up the social ladder-- and most importantly, the use of debt to wipe out accumulated assets.