Oct 222009

Thomas Jefferson once said, “I sincerely believe banking establishments are more dangerous than standing armies.”

The Federal Reserve has proven itself as ugly a failure and more dangerous than anything else created by the Federal government in the last century.

The Federal Reserve is the central bank established in 1913 by the federal government to protect the value of the dollar, control interest rates, and carry out other such functions.

While some of you invariably consider regulation a good thing, reality begs to differ. The Soviet Union is a perfect example of the failure caused by an artificially controlled economy.

When the free market dictates interest rates, we have balance. When a central bank artificially lowers those interest rates, we need only ask when, rather than if, there will be a collapse.

Before our elected representatives entrenched the government in the housing market, banks loaned money according to the borrower’s ability to make payments over the course of the loan’s life. People learned to wait until they could afford to own a house before they asked for a loan. At the same time, banks learned only to loan money to those capable of making the payments.

Back then, banks considered mortgages held as assets, meaning they represented money coming into the bank for the loan amount plus the mortgage’s interest rate. The higher the interest rate, the more money in addition to the loan came back to the bank. Since the banks compete with one another, the interest rates are controlled.

See “free” and “market” work best, but only without government intervention.

One other important note: When the banks were setting their own interest rates, according to competition, ability of the borrower to pay the loan back and several thousand other factors playing in to the interest rate determination, “savings” was not just the initial account you opened.

Unbelievably, the 0.08 percent interest rate you likely get on your personal savings account was at one point an integer, not a decimal. I remember getting eight percent interest on my savings account in the late 1980s.

This means that had you put $100 into savings in the late 1980s, one year later you would have $108 just from leaving the money there.

How and why does this affect you? Well, many from both sides of the aisle claim the Federal Reserve protects the American consumer. They claim the Fed is insulated from politics for the purpose of influencing monetary policy and preventing economic collapse. And, oh, by the way, the Federal Reserve is staffed by Wall Street bankers.

However, the president appoints the chair. Do you not see the danger of having one man setting interest rates and influencing monetary policy when the same man receives his power from a politician?

There is an indisputable correlation between presidential desires and economic policies. The Fed is no exception.

House Resolution 1207 calls for an audit of the Federal Reserve. When co-sponsor Rep. Alan Grayson, D-Fla, asked the Federal Reserve Inspector General if it had investigated where the $1 trillion expansion of the Fed’s balance sheet had gone, she gave one of the most stuttering, stammering, incompetent and incomprehensible responses I have ever heard.

I urge you to watch the YouTube video “Alan Grayson: Is Anyone Minding the Store at the Federal Reserve.”

Then listen to the idiots of both parties who try to defend this lunacy as a good idea. The free market would have allowed the Darwinian principles of business to take hold for the last several years. Wall Street and Detroit would have changed behavior or failed, instead of taking your children’s tax dollars.

These politicians no longer serve the people, they serve themselves and they serve their corporate special interests. The Federal Reserve is the puppet used by those masters and the government is just the arm.

I say, kill the puppet.

Seth J. Stern is a senior journalism and sociology major. His column appears Fridays in the Collegian. Letters and feedback can be sent to letters@collegian.com.

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