Sunday, December 04, 2011

The truth that truthout leaves out.

This post is an analysis of a single paragraph in this article:

It was inspired by the criticism of the article by Stefan Molyneux in his video,
Banksters Own You!

"Only when the Federal Reserve becomes an instrument of the people to calm the mood swings of the market - and not a piggy bank for transnational banking corporations - can we really protect ourselves from a technocratic takeover in the future. And the way to do it is pretty straightforward - it was Alexander Hamilton's idea back in the George Washington administration. Have the central bank owned by the US government and run by the Treasury Department, so all the profits from banking go directly into the Treasury and you and I pay less in taxes while the banksters on Wall Street can find a job at Wal-Mart."

And this is why the 1% is powerful, because people like this guy do their propaganda for free. Let's start off with the idea that the Federal Reserve can become an "instrument of the people". What does that mean? Which people should it become an instrument of? Obviously "the people" is not the shareholders of transnational banking corporations since that's what he's arguing against. How about the shareholders of construction and concrete companies? Are they more "the people" than the shareholders of the companies that compete with them for resources? How about those who get their income from debt, including most pensioners? Are they more "the people" than those who get their income from owning businesses? Or working for those businesses? Under his system the group that is "the people" gets to control the money supply to their benefit and the opposing groups detriment. If anyone would like to write about how this causes and endless, destructive, embittering, cynical, deceptive, manipulative war of all against all, please do so, but read "Atlas Shrugged" first because to be useful you have to improve on that and that's pretty hard.

But suppose for a moment we could agree on which random assortment of interest groups constitutes "the people" (and I bet a moment is all we could agree on it on). How would said collection of interest groups make the Fed it's "instrument"? Would it just say "We want interest rates to be 4%" without worrying about the means? Because that sounds like a recipe for disaster. Sort of like telling a ship's captain "Go in a direct straight line from Seoul to San Francisco". Inevitably the criminal gang interest group collective would have to transmit it's orders through several layers of technocrats, who could interpret their orders selectively and subtly push the advantages of people they're not supposed to push. They could then say that what the interest group collective asks is impossible given current conditions. Not being technocrats how would the IGC know the difference?
That the Fed couldn't be directly controlled by "the people" in the form of an electorate should be pretty obvious. Asking someone to make votes month-to-month on controls on M3, when they neither understand what it is nor the relationship to either other M-indicators, the interest rate, exchange rates, the real economy or anything else is bizarre and obviously not going to happen.

The alternative is that the Fed is controlled by people who are elected. The problem is that the job of any banker is to refuse to loan people money. This seems counterintutive, bankers surely get their money from _making_ loans right? But if depositors wanted their money loaned to whoever asked for it they could simply do that themselves, no need for fancy buildings, weekend golf trips deducted as business trips and all the other bank executives privileges. Banks must select amoung applicants, rejecting some or even most of them, if they want to add value to the loan process*. Politicians don't get elected, let alone reelected, by telling people they can't have stuff. It just doesn't happen. Popularly elected Fed Board members are a recipe for massive inflation, followed by popular complaints about the consequences of popular policies insistence on more power to the government, more policies that are popular and disasterous etc.

So what about the Fed being controlled by people appointed by elected politicians? Well for a start that's what we have now, which should be a sufficient argument against it. In case it's not, such appointments are doubly deficient in terms of "the people" controlling the Fed. For a start "the people" would have to closely monitor the appointment process and hold the politicians accountable for the results. They are unlikely to do this because each individuals opinion of the process is unlikely to change whether he votes for a particular politician. There are many issues that may change a person's vote, and Fed appointments are not likely to be the tipping point. If they're not the tipping point for a particular voter they're not relevant to how he votes. Even if they were each individual voter is unlikely to be the difference between a politician getting elected or not. So any effort the voter puts into examining the issue has two big hurdles to jump before it effectively contributes to change. This effectively puts control over what politicians do in this process in the hands of those who are most interested in the outcome and have most ability to affect politicians, which is to say lobbyists for the most interested parties, the banksters.

Then comes the suggestion that we have a central bank "owned by the US government", which is what we have now in reality, "so that all the profits" (as opposed to 95% of them) "go to the government". Of course by "all the profits" he means all the profits of the central bank itself not al the profits that the actions of the central bank create. When Alexander Hamilton did create a central bank somewhat like this the profits generated by it's actions went mostly to exactly the sort of people the author thinks of as looting bastards. They were thought of that way at the time, which is why that bank was shut, ending an inflationary period that looted the 99% for the 1% very effectively. Needless to say in the end the 99% did not pay less in Taxes and the banksters certainly didn't shop at, let alone work at, the 18th century equivalent of Walmart.

So given that the causes the author supports are directly opposed by the effects of his proposed actions, what gives? Is it that he simply has never been exposed to the arguments that allowing government more power benefits the rich and powerful? No, because they were available to anyone interested, and indeed pushed on those not interested, for decades. It's one thing to not know Milton Friedman's arguments when they're published in "Abstracts of Working Papers in Economics" and another when they're on the Phil Donahue show. You can be politically engaged and disagree with the arguments of libertarians, but you can't do so and not know those arguments. What you can do is pretend they don't exist so as to pretend that your diagnoses and cures are the only ones available. This is what the author is doing. Why pretend? Put simply he wants to advance intersts other than the ones he claims to advance. Therefore he must present his solution as the only one that advances the claimed interests. Otherwise solutions that do advance the claimed interests but don't advance the hidden ones might be adopted. Try to figure out what the hidden interests are. I have some theories but I want some confirmation.

* Some might observe that US banks stopped doing this and started approving home loans to any idiot that was not provably brain-dead at the signing. This is not a flaw in my theory because I said "If" they want to add value.