Island Gazette

For Your Consideration: The Federal Reserve

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By CHARLIE ALLO
Contributing Writer

One might think that the Federal Reserve (Fed) was an agency of the Federal Government, but that would be a mistake.
We are getting a better concept of the extent of this organization’s independence from the government as a result of its reluctance to respond to questions put to it by Congress. Congress is supposed to have oversight over the Federal Reserve, but it would appear that the oversight does not come with any semblance of control.
The President does appoint the members of the Board of Governors and its chairman and vice chairman, but even these selections are chosen from a list of names that are presented to the President to select from. The current Federal Reserve is the Nation’s third attempt to establish a centralized banking system to alleviate many of the problems with the Nation’s currency that sprung up during the Depression; it was established with the passage of the National Reserve Act of 1913.
The fact that the general public had to bailout the very banks that are responsible for stabilizing our currency seems rather ironic.
In bailing these banks out we have allowed many of these same banks to become even bigger, meaning there’s a potential for taxpayers to be fleeced again if they and the Federal Government mismanage the current fiscal problems.
One would think that it would be more prudent to cover the depositors, and allow the banks to fail. It is understood that the shareholders would lose too, but that may give them the motivation to require their individual banks to operate in a more responsible manner; it may also motivate the electorate to require their representatives to curtail some of their programs that tend to destabilize the economy.
The Fed is devaluating our currency by printing money, which is having an impact on our economy by increasing the cost of many of the products that we purchase from other nations; the rise in price for oil is just one of the results to this faulty policy.
Nations that once were willing to buy our bonds, are now considering dumping them because they know that they are going to be paid back with a dollar that has less value. Standard and Poor’s has warned the Government that it is getting close to losing its triple A rating if it does not take action to reduce the National Debt.
The administration it treating this warning as though the rating agency is overreacting, but in reality it is surprising that it has taken one of the rating agencies this long to present this warning.
What is even more surprising is the public’s lack of understanding of the nation’s fiscal condition; the electorate seems content to accept the administration’s position on our fiscal condition.        
There was a time when we were on the “gold standard”, when an ounce of gold was thirty-five dollars; it is now over fifteen hundred dollars an ounce.
The U.S. was responsible for maintaining the price of gold at thirty-five dollars from 1934 to 1960; its intent was to wean the world off the gold standard that most societies accepted as valid.
In 2006 gold was going for about six hundred dollars an ounce; this should give the reader some concept of how fast the value of our dollar is dropping.
The government’s effort to make the dollar that standard for the world currency has failed.
How much information does one need to know that we are on the wrong path and that our government has not gotten the message?
The electorate needs to question the actions of the government and the Fed; it seems clear that neither of these bodies are concerned with stabilizing the Nation’s currency, so what is their intent?
Gold is a barometer for a nation’s fiscal condition, but it would be a mistake to think that it is a precise measurement of the value of any currency.
The collapse of the dollar on the gold barometer is telling the U.S. that it needs to get its financial house in order.
Question, are you sending the message to your representatives that you expect them to address this problem?
It might help if you also suggest that failing to do so would mean a loss of your vote. 


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