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Commentary: It's the Fed, Stupid!

By Tom Mullen

Buffalo, NY – It's the economy, stupid, right? James Carville almost had it right. Perhaps if he had changed one word, we would have addressed the real issue confronting the nation's economy 16 years ago. However, there are decades of evidence that this is one issue that no politician has wanted to go near until now.

The current presidential primary race has suddenly become about change. Candidates from both major parties insist that they are the only candidate that can deliver it. However, which candidate actually promises a fundamental change anywhere in their platform? Yes, change is necessary or we may be heading for times worse than our collective American memory can imagine. But what has to change?

There are plenty of mirages to confuse the average voter with. Gay marriage. Abortion. Terrorism. Evolution. However, none of these issues directly affects the great majority of Americans. The fundamental questions that Americans really should be asking concern themselves, not the country. Why is it that the average American family requires two above average incomes to afford a modest home? Why has medical care become so expensive that Americans must often choose between healthcare and other basic necessities? Are we not the richest nation in the world? Are we not more productive than any society in history? Why is it, then, that the basic necessities of life continue to grow more and more expensive, when progress, innovation, and improvement are supposed to create more leisure time for a developed nation? I grew up in a neighborhood of blue-collar, one-income families that were all homeowners with access to affordable medical care. Why does that scenario seem impossible today?

It's the Fed, stupid.

The Federal Reserve was created by Congress in 1913, supposedly to protect the economy from the vagaries of free market upturns and downturns, and to wrest control of the money supply from Wall Street. However, history has shown that it was this bad idea itself that caused the worst recessions in our history, including the Great Depression. While the average American has some vague idea that greedy businessmen and high living on credit were the culprits, any reasonable analysis must come to the conclusion that it was a shortage of money that brought about our most infamous ten years. The trends that we live with today - overvalued bubbles and the inevitable downturns and recessions that follow, along with money that is worth less than when the cycle began - can all be traced to activities of the Federal Reserve System. It's not that it has to be run better - it's a fundamentally bad idea. Allowing the Fed to impose artificially low interest rates causes new money to be created that is not justified by corresponding real growth in assets or productivity. When the Fed tries to reign in this inflation by raising rates, it strangles real growth while achieving only a temporary, nominal slowing of inflation. At the end of the boom and bust cycle you are left with more dollars in circulation that are worth substantially less. It paves a road that can only lead to one thing: the collapse of the U.S. economy.

Conspiracy theories abound regarding the Fed. The problem with conspiracy theories is that they deflect responsibility for our problems onto mysterious forces that are beyond our control. However, the facts are that the Federal Reserve is a private institution that is not serving the public interest and is resulting in a transfer of wealth from the majority of Americans to a small, wealthy minority - some of whom are not even Americans. It is the result of Congress taking its power to coin money and regulate the value thereof and giving it to a private bank, which then lends the American people their own money at interest! There is a candidate in one of the parties who is running on ending the reign of the Federal Reserve. What should make his argument at least worth listening to is not that it withstands every challenge by the other candidates. It's that none of the other candidates will dare challenge him at all. Money is an elusory concept, and most of the candidates are counting on the fact that most Americans cannot or will not educate themselves about the one thing that their entire lives depend on - money. So far, it's working. I urge every American to educate themselves about the nature of money and what role the Federal Reserve plays. Then, demand real change.

Listener-Commentator Tom Mullen is a Buffalonian who now resides in Tampa, Florida.

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