Politics
The functions of the Federal Reserve Bank are best described as ambivalent. The Federal Reserve Bank states that they were created to balance a banking system that was unstable because of panic (Selgin, 2014). Although, evidence suggests that the Federal Reserve Bank has never been able to maintain a balanced economy, and there has still been plenty of panic since its inception. Saying they balance the economy is even a little bit like using what George Orwell referred to as doublethink in the fictional account of a police state.
In the book, doublethink is when a word is used that has two contradictory meanings that is meant to brainwash people into obeying the party above all else. Research suggests that using a form of doublethink, which they refer to as doublespeak, can help conceal mild-to-moderate threats or dangers that should otherwise be made transparent in order for people to be able to protect themselves (Gruner, Schaefer, Travillion 1991). This is not a new phenomenon. Scripture attests that the priests of Israel were using a form of doublespeak when they were saying there would be peace while Jeremiah was simultaneously warning that they were going to be taken into captivity (Jeremiah 6:14).
Consequently, the Federal Reserve Bank has actually been creating the imbalance in the economy that has allowed them to balance the imbalance since 1914. They have created the credit that created the periods of inflation. Then, they have controlled the inflation they created by raising interest rates (Wheelan, 2010). Therefore, it is a contradiction to say that you are balancing something that is not organically imbalanced; or, like using doublespeak when suggesting that the Federal Reserve Bank is balancing the economy and controlling inflation.
The Federal Reserve Bank also claims that they function to help control deflation, by their own admonition. Although, they are often creating the panic they were created to resolve. They preach the dangers of deflation and create panic about how deflation will damage the economy so they can increase credit that will fix the deflation, which will cause inflation. Then, inflation will require increasing interest rates to control inflation, which will cause danger of deflation, and the cycle continues. All the while, research suggests that deflation can also be caused by increased efficiency lowering production costs and not the absence of circulating capital needed to increase revenue (Selgin, 2014). Therefore, there is no need to panic or increase credit to begin with.
Additionally, because the Federal Reserve was created to control an unstable banking system by its own admonition; then, why should it be so important that they should not associate themselves with the government (Wheelan, 2014)? They were never created to control a corrupt government that was unable to create economic balance because of abuse of power or corruption. Consequently, pride and adamant claims that they are an independent organization is another use of doublespeak because, on the one hand, their name implies a connection to the integrity of the Federal government. While, on the other hand, they imply that our elected officials are not capable of handling monetary policy with integrity, which is why a federal bank would need to operate separate from the federal government. Claiming autonomy from the Federal government, and insulting its capability to create effective monetary policy, is a means of gaining autonomy from the checks and balances that were created to control corruption in government.
There should be no reason why the Federal Reserve Bank should need to be a separate entity from the government if a Federal Reserve Bank is a necessary addition to promoting a balanced economy in the United State according to the The Federalist Papers no. 12 on "The Utility of the Union in Respect to Revenue." In this essay, founding father Alexander Hamilton who served as the first Secretary of the Treasury, makes a case for the benefits of a union for increasing revenue. He attests that the cost of government is increased when each state acts in its own sovereignty comparing this the poverty citizens live in under separate monarchs in Europe who remove revenue from their communities to fund their individual states. Consequently, removing this revenue reduces their own revenue because it's reduces the circulating capital needed to produce revenue in their respective countries (1787). Therefore, the necessity of unifying the banking system under a similar structure of unionizing imagined by the founding father could be beneficial to the economy if it served under the same transparency that was also required in the creation of the union.
Unfortunately, the Federal Reserve Bank does not have the same system of checks and balances as the Federal government. Their only stamp of integrity is made by their assurance that they are not affiliated with the Federal government. Somehow, in a country that is still very patriotic, this appears to work (Selgin, 2014) even while they appear to have no real function other than ambivalent admonitions of what they are supposed to be doing to balance the economy. The only thing they appear to be doing is making a lot of money (Selgin, 2014) controlling the money; and, whoever controls the money, is able to control the people. Therefore, the Federal Reserve Bank should function as a representative of the people through the Federal government and not separately from it. Unfortunately, I think the ones who would be the most disappointed to hear this are the ones who are presently controlling the money.
References Gruner, C., Schaefer, D., Travillion, L. (1991). Testing the Effectiveness of Doublespeak. ETC: A Review of General Semantics. Retrieved from http://0-eds.a.ebscohost.com.library.regent.edu/eds/pdfviewer/pdfviewer?sid=74e92de7-6a3e-426e-a1de-ea54d06bc59e%40sessionmgr4005&vid=3&hid=4202
Selgin, G. (2014). Operation Twist-the-Truth: How the Federal Reserve Misrepresents its History and Performance. CATO Journal. Retrieved from http://0-eds.a.ebscohost.com.library.regent.edu/eds/pdfviewer/pdfviewer?sid=046caadf-eaaf-4df3-8342-e9bac421cbcb%40sessionmgr4002&vid=2&hid=4202
Hamilton, A. (1787). The Utility of the Union in Respect to Revenue. The Federal Papers, Federalist No. 12. The Library of Congress. Retrieved from http://0-eds.a.ebscohost.com.library.regent.edu/eds/pdfviewer/pdfviewer?sid=046caadf-eaaf-4df3-8342-e9bac421cbcb%40sessionmgr4002&vid=2&hid=4202 Wheelan, C. (2010). Naked Economics Undressing the Dismal Science. New York: W.W. Norton & Company.
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