And the next Fed Chairman is ...
President Obama is finally having some success getting a few of his long-delayed nominations for various offices and judgeships passed through our "Do-Nothing" Congress. Very soon, he will nominate a successor to Ben Bernanke, Chairman of the Federal Reserve Bank, perhaps the most powerful banker in the world. I say "perhaps" because nobody knows how many billions or trillions of dollars the Rothschild banking family controls.
Two people who will be voting on the Fed Chair appointment, Independent Senator from Vermont, Bernie Sanders and Elizabeth Warren, the new Democratic Senator from Massachusetts, have come up with four very interesting, insightful questions they will ask the nominee:
1. Do you believe that the Fed's top priority should be to fulfill its full employment mandate?
2. If you were to be confirmed as chair of the Fed, would you work to break up "too-big-to-fail" financial institutions so that they could no longer pose a catastrophic risk to the economy?
3. Do you believe that the deregulation of Wall Street, including the repeal of the Glass-Steagall Act and exempting derivatives from regulation, significantly contributed to the worst financial crisis since the Great Depression?
4. What would you do to divert the $2 trillion in excess reserves that financial institutions have parked at the Fed into more productive purposes, such as helping small and medium-sized businesses create jobs?
These are darn good questions and, believe it or not, they affect all of us right here in Fairfield. I would like to explore them with you, one by one over the next weeks. First up, just what is the Fed's "employment mandate" and why should that be their top priority?
After World War II, with 12 million ex-GIs returning to the domestic workforce, Congress realized there wouldn't be enough work for all of them in the depressed post-war economy and feared an economic relapse into the Great Depression, Part Deux. To prevent this, they passed the Employment Act of 1946, which called for the Fed to ease interest rates in order to make money available for those who wished to start or expand their businesses. The Fed was supposed to track unemployment figures and raise or lower interest rates to maintain maximal levels of employment in this country. Unfortunately, conservatives in Congress watered-down the Employment Act to the point where what they passed was nothing more than a gentle wind. History repeated itself in the recession following the Vietnam War, when Congress passed another version of the Employment Act, complete with conservative gutting.
Since the 1990s, the Fed has used "NAIRU," the Non-Accelerating Inflation Rate of Unemployment, to help set interest rates. NAIRU is an imaginary balancing point where unemployment is used to counter inflation. Instead of "full employment," which conservatives view as inflationary, they figure that high unemployment helps keep prices down. And, as we see currently, high unemployment also keeps workers' wages down too. While I'm sure it's easy for wealthy bankers to look down on us huddled masses and make these decisions, if you live in Solano County, were the current unemployment rate is about 8%, what number would you pick? Really, if you were an all-powerful Fed Chairman, where would you peg unemployment? You can raise and lower interest rates willy-nilly and see what happens to employment and inflation in the online, "Fed Chairman game." Simply Google: "Fed Chairman game." It's not only fun, but it's a great propaganda tool too! It will convince you that high interest rates and unemployment are the only ways to control inflation. Assuming, of course, our highly complex, globally-interconnected economic system has but three variables.