As I often do to escape the dreary ambiance of academia, my energy has recently been put into low-level vocations in order to accumulate hard capital for consumption while I study abroad in Austria.
Recently, while conversing with several colleagues, my eyes darted over to a parking placard hanging from the rear-view mirror of a 2009 Acura. The placard was roughly 3 by 5 inches, orange in color, and had the words FEDERAL RESERVE written as boldly as a such a small place would allow. This car belonged to an employee of the private central bank which has monopoly over the currency of the United States of America. This was no interaction to pass up.
The owner of the vehicle was an older blonde woman, perhaps 50 or so. She stood smug with her hands stowed away inside the pockets of her leather jacket, crisp and shiny and newly purchased. Though her aura reflected a refined vintage beauty, her eyes were deluged with fire and vigor. This woman was the public face of one of the most private institutions in existence today. The same institution which has become the most profitable bank in the history of mankind, raking in over $80.9 billion in 2010, according to NPR news. To have this woman before me now was enough motivation to strike up a conversation. It was time to confront the Federal Reserve.
My casual stride over to her was geared solely by the brain, rapidly piecing together all knowledge I’ve ever learned of the Fed from Hayek, Rothbard, Friedman, Paul, Kucinich, Hazlitt, and others. The hours of studying interest rates, balance sheets, inflation targets, and reserve ratios would now be put to the test, taking all the theoretical and translating it into a practical conversation with an official from our nation’s central bank. The conversation went as follows:
Yaël: Excuse me, madame, but do you work for the Federal Reserve Bank of Richmond?
Ms. Fed: Actually no, I work at the Federal Reserve in Charlotte. But how ever did you know that?
Obviously, this woman is not used to having complete strangers be familiar with her work.
Yaël: Your parking placard. I had assumed you worked at the Federal Reserve Bank for District 5, in Richmond, Virginia.
Ms. Fed: (Chuckling) Oh, haha, I guess it was a dead giveaway! But we’re actually located just in Downtown.
Full disclosure: I had no idea there was a Federal Reserve in Charlotte, North Carolina. Upon further research, I was able to determine that there is an office of the Fed in Charlotte, officially titled The Federal Reserve Bank of Richmond’s Charlotte Office.
According to the official website, the Charlotte office of the Federal Reserve Bank of Richmond is tasked with:
- Promoting the safety and soundness of large bank holding companies headquartered in Charlotte.
- Using Risk and Policy staff to make key contributions to the nation’s financial system.
- To distribute currency and coin to financial institutions.
As even more research unearthed, the Federal Reserve has offices in practically every major city in the United States, at least three in every district (of which there are twelve). They have connections to local banking institutions and are chaired by local bank power brokers who decide where to expand the balance sheets of banks and who shall receive the latest shipments of newly-printed Federal Reserve notes.
Continuing with the confrontation, I transitioned immediately into the problems I have with the Federal Reserve:
Yaël: Interestingly enough, madame, I have done extensive research, and even written a university thesis, in which I put forth the evidence that the Financial Crash of 2008 was caused by your employer. The continued blowing of the housing bubble by lowered funds rates, exploding debt obligations and shrinking reserves by Chairmen Greenspan were directly to blame for the massive bust which occurred years later and the ramifications which still affect us today.
Ms. Fed: Oh, haha! (evil laugh) You certainly have done some research! But it was the banks which caused the crisis.
Yaël: Were not the banks encouraged to participate in incredibly risky behavior by the “guarantee” of the Federal Reserve that they would never fail? Were they not allowed to fester in trillions of dollars of newly-generated wealth which they had no intention of ever paying back and which perpetuated the fractional-reserve system that has diminished savings and real wealth?
Ms. Fed: Well, we actually did our part to save the financial system.
Yaël: But would the entire crisis not been avoided if the Federal Reserve had not begun lowering rates below market expectations during the boom of the 1990s?
Ms. Fed: Bernanke is trying his hardest to fix everything that has gone wrong. Goodbye. (Then walks to car and drives off).
Thus ended my confrontation with an official from the Federal Reserve.
What I can gather from this encounter is one simple thing: that those who work constantly on continuing the status quo actually believe they are doing their country and fellow citizens a service. The idea that the very institutions which caused the panic and recession should be the ones to draft a solution is beyond all legitimate comprehension, but who has credibly accepted all the blame? Instead of truly investigating the causes of the crash, political players have done their part to further their own agendas and continue business as usual.
This is the hubris which those in power continue to hold. The hubris that falsely leads them to believe that they possess the authority and knowledge to combat and solve any crisis which may come about, even if they were the ones who precipitated it.
Perhaps it is time, not to look to the “usual suspects” or leaders to solve our problems, but to ourselves. Becoming informed of an accurate and genuine timeline of events leads to a more clear understanding of why economic recessions occur and how they can be avoided. This shall ensure that we use that knowledge to further ourselves, both individually and as a society, and do not continue to make the same mistakes which have plagued men and women of history.
Now is the time.