By Anthony Wile
The Daily Bell
March 17, 2013
An interesting article in Forbes entitled “If Alan Greenspan Wants To ‘End The Fed’, Times Must Be Changing,” informs us that the predictions we made long ago about the Federal Reserve are coming true. The author of the article is Nathan Lewis, an economist, former strategist for institutional investors and author of a best-selling book Gold, the Once and Future Money.
Our predictions regarding the Fed were first published in May 2009, and were related to a congressional hearing that showed Fed representatives to be woefully unprepared. This was the first inkling we had that the institution itself was in perhaps terminal trouble. Here’s what we wrote at the time in an article entited, “Beginning of the End? Fed Cannot Account for $9 Trillion“…
We saw the interview with Elizabeth Coleman on TV and then again and again and again on youtube.com. It is entitled “Is Anyone Minding the Store at the Federal Reserve?” and it is one of the single most astonishing moments (or minutes) ever manifested or preserved in this already-amazing digital era. A century ago, when the powers-that-be pushed through the act that set up the American Federal Reserve – which basically kicked off the central banking era in America and abroad – the kind of technological ubiquity offered by the Internet would certainly have been seen as a major and alarming challenge. Well, it is.
The Grayson/Coleman confrontation has to be seen to be believed, and even then it may not seem quite believable. How could the Fed, in all its monied majesty, offer up someone so unprepared to answer the questions of a single quiet and persevering congressman? Grayson is a liberal, socialist-oriented legislator – a good government type who is fast making a reputation for taking on government corruption. He is pro-regulation but has not been shy about confronting high profile institutions. He may not want to shut down the Federal Reserve but he certainly wants to make it operate under additional scrutiny. And he makes it clear he believes the Fed needs it. And now Coleman knows it.
Our article continues as follows:
The Fed has survived numerous challenges, but always these were fairly restricted to legislators and others that traveled in the Fed’s ambit. There was no chance that the Fed’s inner-most workings would be broadcast to the world, and that the world would see and comment. The Internet has changed all that. The basic trouble with the Fed – and with all central banks – is that the work they do is not defensible within the broader context of democratic rhetoric.
Since the article was published some four years ago now, the agitation against the Fed and central banking generally has grown worse, as we predicted. There is no real support for central banking. It is a central planning relic of a bygone age when justifications could be made about a tiny handful of men running the world on behalf of everyone else.
But the Internet has allowed people to question this meme – and as there is no good answer, the questions have persisted and the skepticism has grown – along with central banking’s incompetence in solving a Great Recession for which they were evidently and obviously responsible. Eventually, I figure it will burst the confines of the Internet and become a mainstream problem.
It is probably inevitable. And now a further instance of the gradual deflation of this dominant social theme has emerged: The most famous Fed chairman of them all, Alan Greenspan, is questioning not only the functioning of the Fed but its reason for existence. His statements, made in a January interview, continue to resonate – and circulate – and recently resulted in the Forbes article referred to above.
Let’s see what Alan Greenspan (according to Forbes) has been saying recently:
“We have at this particular stage a fiat money which is essentially money printed by a government and it’s usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity… There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.”
In the same January 2011 interview, Greenspan apparently wondered out loud if we even require a central bank! When Alan Greenspan starts to talk about “End the Fed,” things are changing.
The article even refers to our friend and Daily Bell interviewee, Edward Griffin:
Edward Griffin’s The Creature from Jekyll Island is an excellent account of how the Fed came into being. The fact that this 1994 book is, today, the #2 bestselling book in Amazon.com’s Banks and Banking category, the #2 bestselling book in the Economic Policy and Development category, and the #4 bestselling book in the Economic Policy category, shows why crowds start chanting “End the Fed” wherever Ron Paul turns up, with no prompting from him.
The article refers to Money Power itself:
In recent years, any attentive watcher has noticed that the Fed has been working rather closely with certain “Too Big to Fail” banks, in ways that are not necessarily in the public’s best interest. The fact that the Fed is likely heavily influenced by a certain well-known European banking family — a criticism that president Andrew Jackson applied to its predecessor the Second Bank of the United States, just before he killed it — is all the more reason to eliminate its influence in U.S. affairs.
And here is how the article ends:
As a member of the “keep the Fed” camp in prior years, it seems to me now that we will most likely come to that point, in not too many years, where replacing the Fed will be the best and even the easiest path … End the Fed.
For those who think we’re too confident about the evolution of this dominant social theme, please think about this: The Fed these days is reportedly buying most or all of US Treasury auctions and already owns well over US$1 trillion of American debt. The Fed is buying this debt because no one else will. That’s a lot of unproductive paper to hold.
Not only that, but the US government owes so much money on its national debt that the Fed must keep interest rates at almost zero or debt payments would balloon until almost the entire federal budget would be consumed by them.
This means, like Sisyphus climbing up the mountain with a rock on his back over and over, the Fed is doomed to buy US debt at zero percent for an unforeseeable – infinite – amount of time. This is, of course, an insupportable scenario. And thus, we’ve pointed out that the dollar reserve system basically died in 2007-2008 – and later on, Alan Greenspan apparently said something similar himself!
The system, it seems, eventually MUST collapse. There will be no war, no devaluation, no bailout that will likely save the dollar reserve system. Instead there will be … a change.
The wise men running central banking are probably as aware of the problems with the dollar economy as anyone else; in fact, more so. They’ve even apparently started a faux movement to nationalize central banking so as to keep control via the political system directly (see yesterday’s article on this topic) but even this movement is probably bound to fail.
Another possibility that is obviously being considered is the creation of a global paper currency via the IMF‘s SDRs. And finally, the powers that be are probably, reluctantly, considering a state-managed gold standard. Greenspan is apparently going to be a spokesman for this view.
We analyze and follow elite memes but it is not possible at this point to say what exactly will occur. Best case, a money system emerges that is NOT controlled by nation-states and resembles somewhat the pre-Civil War US system of free banking and money competition generally.
The pre-Civil War monetary system created the “greatest nation on Earth” and one that has now morphed into a worldwide empire. But the monetary system that has accompanied this expansion may well be ending. What comes next is unknown. Hopefully it will be freer and fairer than the central banking structure of the 20th century.
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