Triumph of the Plutocrats

By definition, a plutocracy is government by the wealthy.  The only thing worse than an outright plutocracy is a stealth plutocracy.  The anger and hopelessness so many Americans feel stems from the fact that we are effectively being ruled by a plutocracy in the form of the Federal Reserve.  The Federal Reserve Board of Governors is composed of individuals appointed by the president and approved by congress.  The central bank is essentially a quasi-governmental entity and does not take orders from congress or the president.  Its decisions do not have to be ratified by anyone in the executive or legislative branches of government.  They cannot be sued and they cannot be audited regularly like other government agencies.  This should be enough to scare the pants off anybody.  To add insult to injury, the key advisors to the Federal Reserve are the big Wall Street banks who are part of the monetary decision-making process that affects everyone.  The members of the Federal Reserve Board are not elected directly by the people yet their power transcends all bounds of reason and sanity.

This wealthy clique of insiders operates in secrecy like a Star Chamber.  It should come as no surprise that the Fed caters first and foremost to big banks, whose representatives sit at the table during the formulation of Federal Reserve monetary policy.  What is good for the bankers is not necessarily good for America .  This has proven to be the case during the Great Recession, which still has this nation in its grip.  The outrage of Main Street America at the use of taxpayer money to bailout banks still resonates throughout the land.  Not one Wall Street bankster has been incarcerated for the pain he inflicted on America .  Civil fines and penalties are like parking tickets to the large banks.  They pay these penalties out of petty cash.  Yet, the banks help the Fed decide our collective financial future.  Is it any wonder that the Fed immediately rushed in to save the banks after their excesses brought our financial system to its knees?   It is an inside job and everyone knows it.  This is something you would expect from an autocracy, not a country that considers itself a beacon of liberty.  The arrogant bankers or wise guys, if you will, take their cue from Boss Tweed who said, “If you don’t like it, what are you going to do about it?”  That defiant attitude turns the stomachs of Main Street Americans, who are frustrated and seething as they are forced to suffer the consequences of unbridled Wall Street greed.  The injustice is glaring.  The anger is palpable.  Americans are too well educated and well informed for it to be any other way.

Now the Fed has announced a second round of so-called ‘quantitative easing’, purportedly to stimulate the economy and create jobs.  Because the Fed operates like a clandestine fourth branch of government, it can do whatever it wants.  It has carte blanch.  There is little real oversight.  Federal Reserve Chairman Ben Bernanke, like his predecessor Alan Greenspan, regards his appearances before a gaggle of congressional committees as a nuisance.  He appears at the hearings with a smug little grin on his face and talks gibberish.  The financial world hangs on his every word as though he is God Almighty.  You can almost see his eyes roll as he adroitly answers inane questions with didactic clichés and pabulum.  After all, lowering interest rates and printing money is not rocket science.  Bernanke is a hero to his banker friends because he is the mouthpiece who protects their interests.  He goes along to get along.  Bernanke gets it.

Congress can debate in public for months about the content and extent of an economic stimulus package, whereas the Fed holds its privileged deliberations on monetary policy behind closed doors.  The amount of taxpayer money involved in Fed decisions, however, is multiples of that discussed in the halls of congress.  If this seems unbalanced, it’s because it is.  What rabbit hole did the U.S. fall through to allow such a deviant situation to continue unabated?   If the Fed holds interest rates low for a prolonged period of time and savers do not receive a reasonable return on their capital, is that not equivalent to a steep tax increase?  If the Fed prints money and drives down the value of the dollar, is that not equivalent to a steep tax increase?   Isn’t this a perversion of our founding principle of no taxation without representation?  If the big banks are privy to Federal Reserve policies before they are publicly announced, are they not guilty of insider trading when they act to capitalize on the information?

What form of government would allow such malfeasance to occur with impunity?  It is called a plutocracy and it is no different from that practiced by the Medici in quattrocento Florence .  The Florentines kidded themselves into believing they had a representative form of government back then.  Americans are kidding themselves now believing we have a representative form of government.  We do not.  Appointed officials and elected officials are not created equal, especially when the power assigned to appointees is as vast and unchecked as that of the Federal Reserve.  Appointees are second derivative, twice removed from the electorate.  When you see the same bureaucrats, like Ben Bernanke and Timothy Geithner, appointed and confirmed as Federal Reserve Chairman and Secretary of the U.S. Treasury, respectively, after they failed miserably to protect Americans from the predations of Wall Street, it tells you all you need to know.  They were not held to account.  Instead, they were promoted.  The system is rigged and out of control.  If Bernanke and Geithner had worked for a private company and performed so poorly, both of them would have been terminated with prejudice.

So who are the biggest beneficiaries and who are the biggest casualties of this outrage?  The biggest beneficiaries, of course, are the large Wall Street banks along with the government bureaucrats and elected officials who are their enablers.  The biggest casualties are savers and senior citizens.  Those who listened to their parents and saved money for a rainy day and their retirement have been played for suckers.  They assumed they would receive a reasonable rate of return on their hard-earned savings in the future.  They now know that calculation was completely wrong.  If they thought they could retire comfortably, that did not work out very well either.  In case seniors thought they could draw down their principle and still live comfortably in their sunset years, Bernanke and the Fed have disabused of them that notion too.  By driving down the value of the dollar and debasing our currency, money loses value as it sits in the bank earning near-zero interest.  Those who locked in higher yields by investing in long-term bonds will get their heads handed to them when interest rates increase sharply in the not-too-distant future, as inflation runs rampant.  The stock market is too risky.  It is no place for old men.  There are no safe havens.  Such is the cruelty meted out by well-heeled plutocrats.

Members of the Federal Reserve, a largely unknown group of individuals, brought all of this pain to our doorstep.   They are unencumbered by a system of checks and balances.  That constitutional crap is for public consumption only and has no place in the refined realm of the Federal Reserve.  Congress and the president are too busy with partisan politics to pay much attention to the cartel of bankers at the Federal Reserve.  After all, aren’t those bankers the ones who pony up outsized campaign contributions?  It would be poor form to take them to task.

Thomas Jefferson warned us “banking institutions are more dangerous to our liberties than standing armies”.  Unfortunately, we did not heed his warning.  Moral hazard does not apply to bankers for they are a privileged class.  They are a breed apart.  If you are not in the club, you are nowhere.  Wise guys always win.

–  LV

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