Early in the 20th century, a financial crisis panicked citizens into withdrawing all their money at once, which in turn damaged banks. By 1913, Congress responded with the Federal Reserve Act, creating 12 regional banks acting as a federal bank to deal in local and global affairs with both private banks and the federal government.
However, the question remains, is the Fed still doing its job today? Also, what secrets are still being kept from us, and how are the Fed’s actions impacting our economy? Some say the Fed was meant to create a balanced economy, while others argue its purpose was to inorganically manipulate free enterprise, rescuing banks that we’d be better off without.
The main players we are facing today are Ben Bernanke, second term Fed and FOMC Board Chairman and Ron Paul, Texas Congressman and former Presidential candidate. Ben Bernanke says the Fed will continue to take appropriate action for economic stimulus, however, will not commit specific steps, and feels no policy changes are necessary unless the economy begins to decline. All the while, Ron Paul describes the Fed as “the collusion of big government and big business to profit at the expense of the taxpayers”. Ron Paul also believes the bank bailouts were unfair and damaging to our economy.
Continuing to go back and forth, the Fed retaliates complaints against them with explanations. Some say the Fed is overly secretive and should be fully audited, while the Fed exclaims they need their secrecy in order to maintain independence from political pressures and make wise, tough decisions. While it’s being accused that the Fed is systematically allows the value of money to decrease as a result of inflation: for 100 years before the Fed, money tended to retain or gain value over the time. To even the score, the Fed stated that it softens the blow and prevents depressions while keeping inflation in check.
What would things look like if the Fed had less influence? Just to name a few, the government would spend within its means, people would spend within their means, there would be decreased consumption, people would save more and spend less (meaning there would be more investing taking place), America would produce and manufacture more, trade deficit would shrink all meaning that the government would shrink as well.
But how exactly do we fix a broken Fed? For starters, booting Bernanke and getting Jamie Dimon, CEO and Board Chairman of JPMorgan Chase, other big bankers, and employees of money laundering banks off of the Fed boards. Upholding higher standards and not letting corporations pose as banks for bailout money may put a band-aid on the issues at hand with the Fed as well. However, even if the Fed is “fixed” how can we be sure the same secrecy and shady operations won’t happen again?
Source: Best Accounting Schools