The Fed’s Men Behind the Curtain The debate about the Fed is under way, and thank goodness. But as with many policy debates, there really shouldn’t be a debate at all. That’s because, if you think about it, the idea of central banking makes no sense. We don’t have a government-created central repository that plans and manages shoe distribution. The market takes care of that. We don’t have one for cabbage, keyboards or curtains. Somehow, we get books, clothes, tree-cutting services and everything else we need and want without a central planning agency that manages the quantity available, fixes the prices of the products and bails out the firms when they overextend themselves. Why should money and banking be any different? Money is a commodity. Banking is a business. They both originated in the market, not the state. They should have been left that way, so that the quality of the product could be subject to market discipline. In a market economy, things work themselves out. There is supply and there is demand. Entrepreneurs take notice of profit opportunities and jump in to pull the two together. This is how the world works for us. This is how it has always worked. This is how we get our software, coffee, sheet music and beef. It’s how we get our cars, the parts that keep them running and the gas that fuels them. The world is man-made in every respect, and the hands that made it productive, efficient, dynamic and socially beneficial operated within the market matrix. The simple relationships of learning, exchanging and competing gave rise to a glorious system that manages to sustain a global population of 7 billion people. The Fed is a nonmarket institution, much like public housing and the space shuttle. It is a Dark Age creation that still exists for no apparent reason. By Dark Age, I mean, of course, the world before 1995, when the Web — meaning all information — became accessible to the world. Before that, the world remained mostly in the dark, when government controlled the information we could access and private truth had to be shared through paper sent through the government mail system. During the Dark Age, only geniuses like Ludwig von Mises and F.A. Hayek knew that the Fed was a hoax. Most everyone else imagined that the people at the Fed were doing magical, wonderful things inside hallowed walls so that the economy would be stable and grow. Its board of governors was populated by people who knew the economic future and held the power to steer it in a way that benefited everyone. Thanks to the digital age, we now have access to what really goes on. In the last 12 months alone, we’ve been inundated by reports of what actually goes on at the Fed. In 2006, according to released transcripts of its board meetings, its wise men were busy reassuring themselves that absolutely nothing was fundamentally wrong with real estate and that all other economic structures were humming along beautifully. It is fascinating to read those candid transcripts. Far from being an open forum for discussion, Greenspan and Bernanke preside with all power to determine results, practically daring any of their subordinates to disagree with the consensus they arrive at beforehand. The Fed economist sometimes pops up his head to say that all is not well, but it’s like a game of Whac-A-Mole: He gets the hammer on the head every time. It’s the worst case of bad corporate management you can find on record. It makes Dilbert’s world look like a paragon of management success. There is no openness, no truthfulness. If the chairman makes a joke, you must laugh. If the chairman says all is well, you must agree. If the chairman says he knows the future, you must be in awe of his insight. All dissent must be coached within a puffy framework that raises only a slight and probably irrelevant concern, and it is still likely to be punished. Then there is the problem that it is not entirely clear, even to the people in the room: what precisely they can do about anything. They know what they are doing is important and want to believe that they have tremendous power. But here’s the problem…The Fed really has only one significant power: to create the conditions intended to encourage a change in the supply of money and credit. That’s a huge power, but it is not a precise one. The money supply is a lot like an unruly child. Lots of times, the kid will obey you. Sometimes, and unpredictably, it will not. It depends on the mood, the context, the prevailing temperament, the rewards and punishments. And even when the kid obeys, the results are not always what you intend. The council of parents can meet and plan all day, but in the end, the kid has a mind of its own. Two notable examples follow. In the early 1930s, the Fed was desperate to expand the money supply as a matter of both policy and practice. There was no intention to let the supply collapse, as Murray Rothbard has shown. The problem was that the Fed had to depend on the banking system to make it happen through the loan markets. But the system was broke, and it never happened. The same thing happened again from 2008 and forward. The Fed did everything possible to manufacture a far-reaching monetary inflation, but failed to make it profitable for the banking system to cooperate. Contrary to the Fed’s wishes, it never fully materialized. Their efforts only ended up subsidizing failure and preventing a much-needed and deep market correction. The sheer power of the Fed was in full display in 2008, and all the public records indicate what it was used for. The Fed provided liquidity for its friends. They said that they did it all for the nation, but it is unclear that the nation got anything at all from the deal. What is clear is that its friends survived and thrived, whereas many institutions should have gone belly up, as the capitalist system would dictate. That’s the essence of its power and the core of what the Fed does. This is nothing new at all. It’s just that it is now on full display for all the world to see. And this is one reason that the Fed is now under fire as never before. The digital age has pulled back the curtain. Instead of the mighty Oz, we find a few people pulling levers with smoke and mirrors. Before 1989, the world was strewn with such central planning agencies. They were all over Eastern Europe and the old empire called the Soviet Union. Then one day, the whole thing melted away and the absurdity and arrogance of the central planners were revealed to the world. The Fed is no different in structure from these institutions. The whole thing is based on a lie that it takes government power to have a good monetary system. In what sense is it good? The depreciation of the dollar since 1913 has been catastrophic for prosperity. The dollar is now worth less than a nickel. Savings have been expropriated. The Fed’s interest rate policy has negated any real advantage of saving money. Business cycles have become national, international and extended, rather than local and short-lived as they were in the 19th century. The moral hazard that the Fed has built into the system is that financial systems no longer take proper account of risk. In the digital age, the opportunity costs of the money monopoly have been huge. We might have had a competitive money system emerge by now. It could have been based on gold, silver or any other commodity. But the market has not been allowed to work. The Fed, working with the government that created and sustains it, has cracked down hard on every attempt by the market to make something better than the Fed-managed dollar. People now languish in jail for the crime of trying to restore money and banking back to the market. What is the worst cost of the Fed? It has made the federal government, no matter how big it gets, beyond failure. This is the ultimate moral hazard. It has puffed up the leviathan state beyond anything that should ever exist in the world. It’s not taxes that have done this. It is the Fed. In this way, it has made itself the ultimate enemy of freedom itself. And as goes freedom, so goes human rights. The whole catastrophe is no longer possible to ignore. Ron Paul has made it a political issue. Newt Gingrich has jumped on the bandwagon to scrap the Fed. The former CEO of BB&T gave an interview in which he said, “As long as the Fed exists, Congress can effectively print money. And it doesn’t matter whether they are Democrats or Republicans, they would rather print money than tax people. They want to spend because that effectively buys votes, and they don’t want to tax people because that loses votes.” The problem of ending the Fed is not a technical one. It is not much of an intellectual one, either. It takes only a few minutes to figure out that the whole thing is rooted in myth. The problem of ending the Fed is entirely political. The government is dependent on its powers. So yes, it makes some sense that the political class and its friends — let’s call them the 1%, for short — think the Fed should exist. The rest of us should know better by now. Regards, Jeffrey Tucker Executive editor, Laissez Faire Books

I’m excited about creating the e-book and promoting Ceci’s new novel Mofongo, and related cookbook Mofongo-Food for the Soul, on her Cuban family recipies.

Sebastian dreams of being like the other guys, being able to run like the wind across the football field and kick the ball in a perfect arc, right into the goal. But a heart defect means that he must stand on the sidelines. Sebastian finds his venue in the kitchen at Abuela Lola’s house, and together they prepare dinner with exotic dishes from the grandmother’s home country of Puerto Rico. This brings a split family together around the dinner table. “A meal prepared with love not only nourishes the body but also,” says Abuela Lola. Mofongo is Samartin magic at it’s best. This is a story about dancing with death, about how small victories build a beautiful life of love and longing through the generations and hearts bursting in so many ways. Mofongo shows that the distinction between joy and sorrow are fragile, but almost invisable.

http://www.ceciliasamartin.com/books/mofongo/

Art is a transition from this world to the spiritual world where the artist creates. Milton Becerra’s world comes from the earth and Pre-Columbian tradition with the organizational grid of the modern world to hold it up for reconsideration. This installation at Latin American Masters Gallery in Los Angeles was surround sound in visual dimensions, centered by rock.

Sometimes seeing new art marks a transition in your life, and Becerra’s art, marks that for me. Moving into new spaces on the earth, within myself, growth beyond confining ideas of what painting is. New global and universal ideas that hang on the wall, rock, centered, bound by confining thread that suspends and give GPS coordinates to three-dimensional space. Thrilling!

http://latinamericanmasters.com/

http://miltonbecerra.com/intro.html

First – government should not be allowed to print money through the Fed or any other means. This is what makes possible endless wars and subsidies to voting blocks to re-elect politicians.

Second – all government accounting should be on the books. We in business employ accrual accounting which takes into account future liabilities of all kinds. There would be no entitlement crisis if transparent accounting and limits to borrowing were enforced.

Third – the Federal government should be limited in what it can borrow from all sources. Else, they will borrow to fund boondoggles again to buy votes.

The government must be made to rely on taxation to finance its grand plans. If we had been required to raise taxes to fund entitlements, required to pay in current dollars for wars and had to pony up for subsidies to our fellow citizens we would have rebelled at the increase in the tax burden and put congress’ feet to the fire.

Instead, we have allowed liabilities of all kinds to accrue beyond what we can pay and on which we will default.
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Last weekend I visited my friend Bob Fogli in San Juan Capistrano. Fogli has a company called Total Health Enhancement that makes all natural and organic nutritional supplements that actually work for humans and horses. Fogli is one of the most fascinating people I know, describing biology and chemistry in terms I can understand, he is a natural supplement formulator.

Although this might sound like a product endorsement, it is a validation of a life dedicated to alleviating suffering. Bob has a product that eliminates the pain of sickle cell anemia and it is used by Doctors Without Borders in Africa with amazing results. Because of this, a very famous day time talk show hostess is doing due diligence on it now and plans to showcase the results on OWN.

Because his products help with blood flow they are used to treat diabetes in humans, and laminitis in horses. There are products that eliminate gastric ulcers throughout the entire digestive tract, not just the stomach. There are products for joints, the immune system, pain, wound healing, pulmonary support and nerve calming.

What Fogli has figured out, is how to increase the production of Nitric Oxide (NO) in the body. Nitric Oxide is a building block of our bodies, it’s a gas that promotes cell-to-cell communication, it’s also a potent vasodilator and a neurotransmitter. That means it is a delivery system throughout the body and brain, so if you group this with herbs and minerals that the body needs, the absorption is almost immediate.

In addition, the formulations Fogli has come up with, increase the production of healthy mucus throughout the body which makes the for smooth blood flow, digestion, and overall healthy movement of all body systems. Nitric Oxide also acts as a relaxing factor to the smooth muscles of the vascular system. A sense of well being and relaxation can be felt almost immediately.

Recently Fogli created a natural muscle mass builder to replace steroids that were banned in racehorses. Because of this one product, Bob Baffert, a top racehorse trainer, endorses his produces and has all 140 of his horses at the California tracks alone, on this product and one that eliminates pulmonary bleeding. Trainers across the country have caught on, and Total Health Enhancement is providing what no other company has figured out how to do, make a product that works!