Monday, December 24, 2007

Things that Make Me Mad, Part One: The Federal Reserve

**Update 1/25/08: a related article

In concern for the tanking value of the almighty dollar, I am restyling my disgust with politics. I had been ignoring it altogether. Now I realize that ignoring it is the same as pledging blind allegiance to a power-hungry federal government whose growth has gone unchecked and which strives to make all citizens completely dependent upon it.

So, I'm researching the things that I don't understand. Starting with the Federal Reserve.

Did you know that the Federal Reserve is neither "federal" nor a "reserve?" It is not a government institution at all, but a group of large private banks that "creates" money to bail out its own insolvency, flooding the marketplace with dollars backed by... nothing, diluting the power of our entire money supply and economy. And FDIC doesn't seem to be insurance at all. It's another way to pass the burden of reckless banking practices on to consumers.

How great is that?! We are protected from the collective hardship of a free market financial system by footing the bill for the failure of large private institutions. This is brilliant... if I'm the BANK.

It makes me feel good to know we've got a system that encourages huge loans to businesses and countries that will never be able to repay them. When interest payments slow, banks can just roll over the loan, making repayment even more impossible. The banks still get their interest payments. If the borrower defaults, the American government guarantees payment, partly by FDIC "assessments" ultimately paid by consumers and partly by creating money out of thin air, which renders less valuable each dollar you actually make. The banks always get their money. Rather, the banks get OUR money. We pay for their mistakes. But, our taxes don't accurately reflect all the money our government also borrows. Our grandchildren can worry about it. That's right, we're letting the banks take our GRANDCHILDREN's money.

"Public ignorance of how the game is really played was dramatically displayed during a recent Phil Donahue TV show. The topic was the Savings and Loan crisis and the billions of dollars that it would cost the taxpayer. A man from the audience rose and asked angrily: 'Why can't the government pay for these debts instead of the taxpayer?' And the audience of several hundred people actually cheered in enthusiastic approval!"
G. Edward Griffin in "The Creature from Jekyll Island: A Second Look at the Federal Reserve"

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