Originally posted on 3 Jan 2014

We’ve all heard about accountants cooking the books. Mike Whitney writes about Book Cooking on New Year’s Eve in the US but he talks about bankers doing just that. If fact, the US Federal Reserve Bank. He quotes Fed Chairman Ben Bernanke on the 100th anniversary of the Federal Reserve as saying: “Increasing the Fed’s transparency, openness and accountability has been one of my top priorities as chairman.”

The article says that Ben Bernanke is a big believer in transparency. Transparency, transparency, transparency. Hardly a day goes by that Bernanke doesn’t reiterate his commitment to transparency. He thinks the Fed should be as open and honest as possible. That’s why he named his new program something everyone could get a handle on. He named it “The Fed’s Overnight, Fixed-Rate, Full-Allotment Reverse Repo Facility.”

You can’t get much more transparent than that, can you?

What the heck does it mean? Could someone from those who read my blogs explain it to me please?

You can read this excellent article by Mike Whitney in Counter Punch, here.

Is there a lesson here for accountants and lawyers to use language that is pellucid – crystal clear, simple to understand and leaving no doubt in the mind of the reader? I think so.

The Fed is an unusual institution. If you’d like to find out who owns it, read this article by Dr. Edward Flaherty here although you may be no wiser after doing so. Dr Flaherty, who hails from Department of Economics College of Charleston, South Carolina, has more to say on this subject on PublicEye.org here.

The Board of Governors of the Federal Reserve System say that “The Federal Reserve System fulfils its public mission as an independent entity within [the US] government.  It is not “owned” by anyone and is not a private, profit-making institution. As the nation’s central bank, the Federal Reserve derives its authority from the Congress of the United States.”

That’s clear isn’t it?

Take a look at this YouTube video and you’ll learn that the Fed isn’t Federal and it has no Reserves. It’s not even a Bank.

Unbelievable? Yes but nothing new… The Fed has faced various criticisms since its inception. Wikipedia says that “perhaps the most widely accepted criticism of the Fed was first proposed by Milton Friedman and Anna Schwartz, namely that the Fed exacerbated the 1929 recession, sparking the Great Depression. After the stock market crashed in 1929, the Fed continued to contract (decrease) the money supply and refused to save banks that were struggling due to bank runs. This mistake, critics charge, allowed what might have been a relatively mild recession to explode into catastrophe. Friedman and Schwartz believed that the depression was ‘a tragic testimonial to the importance of monetary forces’.”

Interestingly, since Friedman and Schwartz first uttered their criticism of the Fed, many have since agreed with their theory, including current Fed Chairman Ben S. Bernanke, who said: “I would like to say to Milton and Anna: “Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

Finally, if you’d like to delve a little deeper, I recommend a YouTube video by G Edward Griffin. He is the author of The Creature from Jekyll Island: A Second Look at the Federal Reserve, available from Amazon, here.

Martin Pollins
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