For its part, Congress - whose stimulus projects (with the possible exception of the recent tax cut bill) are being met with the increasing ire of a debt-weary public -- likewise appears unlikely to comply with Bernancke's plea. Similarly, the increasing clamor for austerity does nothing to help open the Main Street money spigot and so, mere weeks after the Fed announced QE2 last fall, whispers of additional rounds of easing had already begun to surface. These whispers are particularly noteworthy because QE2 - while staunchly defended by Bernancke - had met with a firestorm of criticism from as far away as Brazil, Germany and China as well as here at home.
The problem, as Nobel-prize winning economist and former Chief Economist and Senior Vice President of the World Bank Joe Stiglitz explains it , is that "money isn't going into the American economy. The lending is actually below what it was in 2007. In a globalized economy, the money is looking for the best place to go. And where is it finding it? In the emerging markets. The irony is that money that was intended to rekindle the American economy is causing havoc all over the world. Those elsewhere in the world say, what the United States is trying to do is the twenty-first century version of 'beggar thy neighbor' policies that were part of the Great Depression: you strengthen yourself by hurting the others."
This criticism, whether justified or not, pinpoints a crucial fault line inherent within our current monetary system. This is to say, how can the Federal Reserve, as the nation's designated monetary authority, balance the internal needs of the world's largest - and menacingly weak - economy with the inevitable impact that that economy has on the global economy, all through a monetary system precariously built on debt?
Stay tuned for our conclusion.
Notes:
[1.] The legal status of municipal corporations was first settled by the U.S. Supreme Court, in the 1819 decision Board of Trustees of Dartmouth College v. Woodward. Here the Court "invented a legal distinction between corporations chartered by states. Ruling that a charter granted to private citizens for personal interests is not a conveyance of privilege from the sovereign (which now meant the People and not the king) to the incorporators, but rather a contract between the state and the incorporators, the Court argued that the state could not change, limit or revoke the charter once issued. To do so would be to violate the Contracts Clause (Article 1, Section 10) of the U.S. Constitution, John Marshall's court argued. . .Henceforth, private business corporations would have an increasing share in American sovereignty. Business corporations gained legal independence from state legislatures as a result of the Dartmouth College case. But this ruling played-out quite differently in terms of public corporations, like municipalities. . .Municipal corporations have no incorporators other than the legislature itself, claimed the court. Neither the people living within the jurisdiction of the municipality, nor the local governing officials were recognized as the legal recipients of a charter from the state. In fact, residents living within a municipal jurisdiction were deemed to be mere "tenants" of the municipality. Therefore, although the state legislature could not presume to govern the actions and behavior of a business corporation, once chartered, the state could unilaterally change municipal boundaries, revoke or impose local laws, or even dissolve the municipality unilaterally, according to this long-standing theory of corporate law. It is supported by precedent that has little opportunity to gather dust as it is regularly pulled from the shelves by corporate attorneys and state judges who argue for the sanctity of a legal tradition that denies the fundamental right of people to govern themselves in the places where they live." [Emphasis mine]
[2] Here is a "list of the 276 most populous incorporated places in the United States. As defined by the United States Census Bureau, an "incorporated place" includes a variety of designations, including a city, town, village, borough, and municipality. . .PLUS a list of the 7 incorporated municipalities (municipios) of Puerto Rico with a population on July 1, 2009, greater than 100,000 as estimated by the United States Census Bureau, and the rankings they would have if included in the above table." Note that the preceding is a list of only the "most populous" incorporated places!
Geraldine Perry is a researcher, free-lance writer and co-author of The Two Faces of Money . She holds a Master's Degree in Education with a concentration in library science and is also a Certified Natural Health Consultant. Her expansive accumulation of research in the area of health, diet and agriculture eventually led her to questions surrounding money creation.
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