The Fed is Evil

And that's its job.

WARNING: The following is NOT a conspiracy theory; rather, it’s simply another example of the spontaneous order that arises when individuals act in accordance with their self-interests.

The Federal Reserve has two (2) mandates.  First, it must increase the size and scope of government by reducing the costs of that expansion or, more accurately, by pushing those costs off budget.  Second, it must protect the value of financial assets, thereby protecting the wealth, privilege, and status of the rich.  The Federal Reserve has done a wonderful job in fulfilling those dual mandates, and it always will because you have to be an extraordinarily politically-adept person to become a Federal Reserve Governor or Chairman, so no one who would ignore or mistake those mandates will ever get the job; and, if for some extraordinary reason, the do get the job, they won’t last long.  Quite simply, good people don’t join the SS; if they do, they won’t last or they won’t remain good; the circumstances simply ensure a particular outcome (loyal SS members), so no one needs to plot or mandate to cause that result; it just happens as the natural inevitable result of the nature of the organization and its powers.  Granted, I’m comparing the Fed to the SS, but not because I think the two entities are morally-comparable, but rather solely because I want you to understand that no one has to tell anyone what these organizations really do or what you must do to belong and thrive therein; in both case, it’s so obvious that no conspiracy or mandate is required; members may not even be consciously aware of their purpose and function; rather, they’re simply good at their jobs.

After all, suppose the government wants to finance some war; who are you – a mere economist – to second guess that decision?  You just print the money, thereby facilitating such wars.

Or suppose the government says a novel virus is going to kill us all.  You’re not a doctor, so you just print the money, thereby facilitating lockdowns and other forms of idiocy.

The point is that whether you believe in larger government or vehemently oppose it (or any particular instance of it) how can you substitute your judgment for the experts’?  For Congress’s?  Unless you are ready, willing, and able to act as a dictator, you’re facilitating the expansion of government just by existing, and the better you are at your job, the more you expand the government.  You’re not working at a “great” place when the only alternative to facilitating bad and wicked government programs is becoming a bad and wicked dictator, so the Fed is always and everywhere the enemy of human freedom.  By its very nature, it encourages bad and evil government decisions by making those decisions cheaper.  (Granted, it also reduces the cost of good government programs, but do those benefits outweigh the costs?  Paying a little more for good government to have much less bad government doesn’t sound like such a bad idea to me; does it to you?)

Likewise, you are protecting the rich whenever you protect the value of financial assets.  Notably, that’s true even if all you do is limit volatility in financial markets as less volatile assets are worth far more than volatile assets. (The risk-free rate is always the lowest rate.). Of course, you aren’t likely to limit yourself to limiting volatility; instead, you’ll almost always degenerate into literal price protection (The Bernanke Put), meaning that you’ll flood the markets with liquidity whenever prices fall “too much” or “too quickly.”  Not to mention that you’ll want to intervene whenever there’s a “panic,” thereby combining a reduction in volatility with price protection.  And you wouldn’t be responsible if you didn’t intervene to “save” us, ala TARP, which utterly destroys price discovery and steers scarce societal resources into the idiots who got us into the crisis in the first place.

Now, again, the critical thing here is that doing your job well means doing your job in a socially destructive way: if you protect the price of financial assets, you necessarily benefit the rich more than everyone else because the rich own more financial assets than the rest of us.

Not to mention the fact that you’re steering money from the real economy to finance because you’re subsidizing finance.  All that money that would have financed better cars or cancer cures or anything else gets spent on bankers’ salaries, and all that human capital that should be building rocket ships is wasted on hedge funds.  I mean ask yourself: is it wise for a society’s rocket scientists to be hedge fund managers?  Shouldn’t they be rocket scientists?

Of course, providing free insurance to the rich is costly, so how do you finance your handouts to the rich?  Inflation.  You print lots and lots of money, thereby impoverishing everyone, and you waste that money on protecting rich people’s assets – sounds like a great job, no?  Do you see why the Fed won’t attract or retain the best people?

And then the military gets involved.  If you’re the US military, you’re worried about protecting the “free” world, and what better way to protect the free world could there be than using our financial power to control it?  The great thing about financialization of the world’s economy is that it means everybody is financially linked, which makes it much harder for anybody to go their own way.  I mean, sure, you could say no to US missiles in Europe, but how are you going to say no when the Fed is the only thing keeping your banking sector going?  You can say no to US demands if and only if you’re willing to suffer a great depression to do so, and most people – especially your rich people – won’t be willing to do so.  To put it another way, did Europeans put their people on the dole (accepting lower standards of living in exchange for greater “social justice”) or did we put Europeans on the dole, essentially rendering them incapable of resisting us?

In short, who in any position of government or business would have asked whether any of this made any sense or promoted US interests?  And if they had raised questions, what would have happened to them?  Granted, the US military-industrial complex and its financial sector may not have conspired, but why would they have needed to?  Each wanted exactly the same thing, and the Fed facilitated what they wanted.  Perhaps COVID leaked from a lab, but the Fed’s going to print money to facilitate the response regardless, so why would anyone need to agree on a response?  And, sure, the Fed’s actions helped the military cover it up (assuming they needed a cover up), but – again – the military doesn’t need to tell the Fed anything.  As long as the Fed does its job, the military’s happy.  See how it all works?  Just like a conspiracy, but without any conspirators – everyone in the system acts for himself or herself or xirself, and the rest of us suffer.  Any system that privatizes gains and socializes losses will result in “conspiracy-like” consequences, which is precisely why such systems must be shunned.