IPFS Edwin Sumcad

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Edwin Sumcad

More About: Federal Reserve

Robinson Crusoe’s Abuse Of The Federal Reserve

        Everybody wants to share the plunder and the pillage of the rescue package not just from financial competitors that are going bankrupt but also from political opportunists that want to poke a finger on the pie!

       The auto industry’s Big Three are blackmailing Washington … they are threatening a recession if the federal government decides that they are not in the loop like the rest of freeloaders salivating for a bite of the earmarked bailout bonanza. They can pull the string in Wall Street and turn the stock market upside down anytime if they want to.

        Just recently the Tri-State governors of Connecticut, New York and New Jersey wanted to poke their fingers on the pie too. Their excuse is that 82,000 finance jobs within their jurisdictions will disappear due to economic meltdown; they need at least $48 million to bail their constituents out of economic difficulties!

        Mama mia! … Isn’t the Weather Underground also asking a financial rescue package, now that its socialist candidate Barack Obama is president of the United States? Bill Ayers’ revolution to turn this country into a socialist state is going to suffer a long dry spell in funding once the top 5%-10% big taxpaying corporations take their plight out of the country. Millions of jobs will be lost, and unemployment will be so severe that the result is not just going to be a bad recession but a depression worse than that occurring in the 1920s-1930s.

        Isn’t life becoming more and more complicated and confused in the United States of America?

      We can simplify life. Get rid of the country’s banking system and forget about bailouts that see no light at the end of the tunnel as to when this ugly mood is going to turn around and this blood-sucking spin going to stop.

      The problem is, this is the 21st century.  No Robinson Crusoe is sane enough to convince digital Americans who are  at their laptops figuring out the rise and fall of the stock market, that life in the cave is much better for Americans because it is problem-free … no Freddie and Mae, no corrupt lending institutions, corporate leeches nowhere to be found, no bailouts, no fork-tongued politicians, no dreaded economic depression, and what have you … you name it! 

      In this millennium, American technological know-how is in the belly of the Universe; America’s robotics are exploring the Galaxies and Americans are about to travel to the moon and beyond, and yet to Robinson Crusoe these are nothing compared to living a simple life in an island thousands of miles away from civilization.  

      And this world’s most marveled castaway from England,  had lived it to prove that he was right! Read Daniel Defoe’s famous novel published in 1719, and get the idea of what I am talking about.  

     Following a terrible shipwreck where everyone else perished, this survivor was marooned in the remote Caribbean Island of Tobago on September 30, 1659. He  was back in his hometown of York, England to prove that in the island where he was banished by fate for almost three decades, there was no bank in sight stealing the people’s money, and there he could live happily forever.

       Crusoe’s return to England was chronicled on that fateful day June the 11th in the year 1687, after living in the jungle infested with cannibals, mutineers and pirates, for 28 years. There were no IRS and Federal Reserve run by “thieves” to worry about!  Only cutthroats he loved to mentally joust, and survived.

     Leftwags [leftist enemy within against the government] --Americans that live a good but spiteful life in America -- would rather cover up for terrorists after they blew up New York and Washington, D.C. and killed thousands of Americans, than condemn the perpetrators’ savagery or defend their country against terror.   

     They believed that 9/11 was an inside conspiracy and Al Qaeda was not to be blamed because Americans themselves – not the terrorists – had created this infamy!

     This foul anti-American mouthing is a favorite menu of the radical Media, especially leftist writers with a strong appetite for sensationalism, and therefore its notoriety is indubitably of public knowledge.

      The Federal Reserve is seen by America’s modern Robinson Crusoes as a nuisance “interventionist” in our free market system.  It is due to lack of better understanding if not ignorance of the fundamental function of central banks in the economy that those surviving castaways would like to see banking institutions abolished.       

      The wealthiest and mightiest nation on the planet known to the world as the United States of America is, in the study of economics, a push-button economy.  The system was structured in such a way that the economy functions almost by itself with a modicum of human intervention.

        America’s institutional infrastructures were built to perform programmed tasks.  Interest rates are regulated for investments and/or expansion to achieve an annual target growth, aggregate demand is stimulated against recession and consumer spending carefully managed to prevent a hyperinflation that could ruin the economy. In short, the Federal Reserve is in control. Once the button is pushed, the moving economy hardly alters its course.  

      The banking institution in this country is one of the towering pillars not only of the U.S. economy but also of the global economy. The banking system is the principal mechanism through which the money supply of the country is created and controlled.

      The economy would ground to a halt if banks and lending institutions become dysfunctional or for some reasons, like when there is a nationwide calamity, or the occurrence of a national catastrophe or civil war, are de-activated or prevented from operating. The worst that could happen is, life goes back to the cave, so to speak.

      In Crusoe’s time, banks or lending institutions were never heard of. Later barter and shop economies developed. Goldsmiths issued receipts for the deposit of gold they received in the course of their calling. They began lending money – deposit receipts being used as money. 

      Deep back in time, our goldsmiths were the first banks that issued banknotes, so to speak [receipts as paper money]. This historical account originated from England.      

      The International Monetary Fund [IMF] and the International Bank for Reconstruction and Development [IBRD, better known as World Bank] came out from the Bretton Woods Agreement and the U.N. Monetary and Financial Conference also in Bretton Wood, in 1944.  IMF and the World Bank started operating on March 27 and July, 1944, respectively.

    How far we have gone through so far from that antiquated goldsmith banking system in the village, to global banking in 64 years, is truly mind-boggling!

     Still, the complexities of modern economics do not make the most innovative facsimile of modern banking like the IMF and World Bank, a flawless system that is expected to function perfectly to the button. Their structural operations only serve as models to banks and central banks of countries that came out to be members of the international community under the aegis of the United Nations.

     The system is still improving. So is the Federal Reserve. But this far, it brought us to the Moon, walked us through cancer, and spared us from the deadly consequences of diabetes among still many others. It made us laptop-friendly, and by touching the keyboard enabled us to reach the edge of the Universe!

      Still, the G20 Summit that met in Washington, D.C. recently, was IMF and World Bank working all together endlessly; it was an institutional process of improving their role to society, to make this world a perfect place to live in for you and me and the rest of human beings.

      For any American Robinson Crusoe attacking the Summit as an international conspiracy to steal our American dollar to bailout the falling global economy, is an open display of one’s insanity, not just culpable ignorance.

    The black knights of street economics also attacked the Federal Reserve as “unconstitutional”.

   The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank [the Fed],” goes the punch.  It was a bolo-punch against the Moon. If it is unconstitutional, the Fed would have been gone by now.  It is still with us to this day since Congress passed the law creating it ninety-five years ago.

        Let me run some learning flash cards here about how the Federal Reserve addresses the problems of the economy. The Fed has 12 regional Federal Reserve Banks strategically located in different parts of the country. America looks through the windows of these regional porches and solves most of its financial crisis from and through these banking extensions in a unique way the outside world has ever seen.  

       For example, the Fed tackles the nation's financial problems big or small with the participation of the public from the grassroots [consumers] up to the top most level of authorities in the Fed totem pole of power, to and from Congress and to and from the Office of the President, before decisions are made and applied to any kind of fiscal and monetary problem that seriously bugs the economy.

     To understand the details of how this system works, all one has to do is read what the Fed is all about in Plain English published in the Internet.  This document gives a systemic understanding of the answer to the question why in solving intricate economic problems the U.S. economy, aside from its enormous size, turns out to be the greatest in the world!

     The world watches how the Fed works, and to what extent its monetary intervention affects the global market. That the rise and fall of the global economy largely depends on how the Fed influences Washington, has long been written in stone. 

       As a development economist serving as deputy permanent representative to the UN’s Economic and Social Commission for Asia and the Pacific, I was amazed by the published works of world renowned authors and scholars on how the U.S. financial and banking institutions work. Some of those documents can be read not only in UN libraries but also in public libraries all over the world.     

       One of the modern economic wonders of the world is the United States' unique banking system. The statutory infrastructure that the U.S. Congress constructed around the system enthralled researchers, economists, constitutionalists, writers, logicians and truth-seekers in the academe who benefited from this knowledge! In their studies, they found the U.S. Federal Reserve intricately unique. It also attracted charlatans self-styling themselves as “revolutionaries”.

      Americans are generally proud of their banking system to which the modern world is beholden, except a pocket of active radical dissenters ideologically committed to change America from what they perceived as an evil empire, to an empire of their own.   

      In my own study of ASEAN [Association of Southeast Asian Nations] and the U.S. banking systems that relates to regional economic development, this pride that swells in the breast of learned Americans is beyond reproach. The knowledge they accumulated from the course of their academic investigation which was similar to mine cannot be diminished by innuendoes hurled against the Fed by those who would like to see the system’s demise.      

     This endless accusation that this current multibillion-dollar bailout of mortgage banks in crisis and other financial institutions that went under is the handiwork of monopolistic vested interest is an arrogant display of ignorance on how the U.S. central banking system works.  The bureaucracy was primarily structured precisely to forestall control of vested interest.         

       When the Federal Reserve was created in 1913, Congress bargained for bureaucracy to be written into the law as a structural safeguard to make the system works – slow you might say, but damn sure.      

       In spite of this, critics from the Austrian School and Chicago School wanted the Fed abolished and replaced by computer. Many knowledgeable Americans believed that this suggestion came from another planet. 

       I agree, and with it goes my own finding: Studies show that too much exposure of juvenile expertise to Starwars creates some kind of Sci-Fi hallucinations … brilliant in rhetoric, but actually dull in substance.

       Radicals have been inspired by the argument of Milton Friedman of the Chicago School that the Fed caused the devastating inflation of the 1970s. Friedman's complaint is written in his book, and can also be read in the Internet.  

     But Friedman, like any ordinary radical pincher, was terribly wrong as usual.  The towering inferno that inflation was in the 1970s was caused by rising oil prices that also caused stagflation. [2] Many Americans who suffered in this crisis and still alive knew that Friedman lied. This is not a surprise to me and to other economists because we know that Friedman’s kind specializes in predicting crisis.  If there is no crisis to predict, he creates one and indulges in fault-finding with the voracity of a glutton in the first bite.

     Think of America without banks or Federal Reserve, no IRS, no currency [burn the dollar bills and flush the coins down the toilet] as what angry street economists suggest. What kind of America we will have?

      Anyway, the possibility of that scenario happening is like jumping without a parachute from an American Airline forty thousand feet in the sky and hoping you are not dead when you drop to the ground.  Just imagine how stupidly insane that is.

       This country is not a secluded island in the Caribbean like Tobago.  And it is not possible for Americans to live a life that Robinson Crusoe had experienced in a different time, at a different place … impossible!

      Those listening to such macabre proposition must be dying of laughter because it is such a funny joke.

      But to me even just to think about it is an intellectual obscenity. #

© Copyright Edwin A. Sumcad. Freedomsphoenix.com access December 03, 2008.

The writer is an award-winning journalist. Know more about the author by reading his published editorials and feature articles or you may e-mail your comment at ed.superx722@yahoo.com.sg