Is it the prerogative of the Federal Reserve to guide and protect the American economy? What tools and strategies have they nominally employed in order to effect this in the short and long-term?
What is their legacy in the 20th century, and how should the understandings of their work in the past century help inform the reliance of Americans to continue looking unto that same ‘non-Federal,’ Federal Reserve in the 21st century?
Created in 1913 through an act of Congress, the Federal Reserve is an independent bank that centralizes its influence of monetary power in an administrative role amongst all major American banks, wherein they set interest rates, inform the Federal Government on strategies they deem proper for the domestic economy, can print money, and control the purchasing power of the U.S. dollar,—this having a global effect on the global flow of money. Likewise, as a central bank, the Federal Reserve can work in consortium with other central banks from other nations in alliances, in order to attain desired ends.
There are seven governors, or members in the highest echelon of the Federal Reserve central banking system, and they are nominated by the President of the United States and confirmed through U.S. Senate approval.
Now, as it regards the nomination process that the Office of the President makes officially public, and the U.S. Senate confirms, is it farfetched to assume that the financial ideologies of a political party with its representative as the Executive in the office of the President, and has a U.S. Senate controlled-majority, may differ in monetary policy from another political party? If so, would the difference in monetary perspective be great between both parties, and would it have a palpable effect on the nomination and confirmation process of member-governors to the Federal Reserve?
As can be gleaned from the national economic legacy of the Federal Reserve in the 20th century, wherein both political parties have been in control at one time or another of both, the Executive Office of the President and one or both houses of Congress, the work of the Federal Reserve has been close to the same with one exception in time: the administration of President Ronald Reagan. Under President Reagan, monetary policy was largely set forth according to the understandings of the President from his time as Governor of the state of California: he lowered taxes, simplified the tax system into three tax brackets, worked to reduce the size of government bureaucracy, and to increase its racial diversity; he cut away at unnecessary financial & labor regulations, and very importantly, was a champion of financial self-determination through the vehicle of entrepreneurship, having a steadfast, and passionate belief that the resolve and ingenuity of the American individual was the true economic force that could drastically improve the American economy. A major advantage the Republican President had was his understanding that in talking directly to the people, he could best reason with them, and inspire them to think, feel, and realize that this was THEIR economy, and that the federal government, as he understood it, was supposed to be ‘for and of the people,’ rather than some separate, increasingly large entity functioning separately of the people: setting rules, creating regulations, and establishing ideological trajectories.
Reagan believed in the American tradition of self-determination; that the national economy find its roots in the strength of individual economies; and so, entrepreneurship and a ‘free market’ was fundamental to his economic endeavor.
The contrast here is that though the Federal Reserve was still seeing interest rates in order to control the value of debt, the U.S. dollar, and the domestic/ international global flow of money, the actions of the Executive of the Office of the President made financial policy endeavors that would transform the national economy with greater effect. Again, the Federal Reserve was taking actions to affect the economy with its tools and strategies, but the President made greater moves that were able to positively turn the economy around. Whereas the Federal Reserve typically communicates in a vocabulary of words that express its guiding norms and modes of monetary policy in response to its understandings and observations of domestic/ international economic money flows and how a myriad of internal & external economic factors may play into their short and long-term outlooks, President Reagan simplified the governments tax relationship to the American people, communicated his plan and took action to reduce the size and cost of government, and seeked to reason, remind and inspire the people with an awareness that their self-determination to use the free market to entrepreneurially accomplish their dreams is the actual economic force. The Federal Reserve does not speak to the people, its construction primes it to speak a vocabulary that is not directed to ‘Main Street,’ but to the largest movers of market forces, governments, and those investors who speculate in it on ‘Wall Street.’
The true interest of government is to serve and protect all the people, according to the word & spirit of the American tradition of liberty and justice for all as found in our Declaration of Independence & Constitution. At best, the Federal Reserve has a split interest; that is to say, it is both independent and semi-public. Its construction defaults it into a split priority of purpose, and left unchecked,— its endeavors, strategies and market-affecting tools have not historically been an inspiration delivering a shaping or rise in entrepreneurial self-determination for the American people, but a continuity of cyclical economic recessions, and finite, artificially-created market ‘bubbles,’ that benefit a continuously decreasing sum of people who are able to rise out of debt and own their own homes. Most people are less and less able to own their own homes outright, or to not be burdened with debt, or the effects of a continuously depreciated U.S. dollar as the price of goods increases. The Federal Reserve that has favored an international financial ideological perspective balance can never drum up the true American engines of economic growth: the ingenuity and self-determination of the American individual as an economic force because of its split priority. No, the people of America should not have the Federal Reserve at the helm of the economy because history has shown that the central bank’s economic priority is not the economy of ‘Main Street.’ Instead, we must empower ourselves to become resilient wellsprings of economic self-determination. It is only that steadfast individual resiliency of the determined mind and continued action of belief in our ability to achieve for ourselves, (and in turn, our families and communities), that can create true economic strength.
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