There is always a self-styled “guru” attracted to our financial debacle so generous in giving public statements of “facts” in monetary economics. Hardly are those established as facts but only theoretical assumptions!
It started with Joe the Plumber. It is only proper that we respect his negative opinion on President Barack Hussein Obama’s wealth distribution plan. However, Joe tips those prone to go over the edge with nothing to contribute but mistaken assumptions. A carpenter or auto mechanic mistakes the “given” as hard fact or assumes that his personal conclusions are “facts”.
For example, it is proclaimed with so much bravado, that the Federal Reserve is at liberty to “print money to destroy the economy”. This is not a statement of “facts”. It is an intentional “misdeclaration” of assumption, probably to air out a personal grievance or to incite the public to stage a general protest against some Treasury and Fed officials or even against anyone or anything only God knows.
First, it is the Department of Treasury that prints money, not the Fed. The Fed “creates” money. Unlike the Treasury, the Fed does not use a printing machine – it uses the computer. The Fed buys a “bond or mortgage-backed security” from banks. In return, the Fed issues a “credit” to the banks’ accounts. The banks would then lend this Fed-backed credit to generate more money!
In effect, money is created in the form of credit. This is all done through a computerized network of financial transactions.
Second, the National Treasury prints money when new money is required by the government, i.e., to replace old notes and to stabilize the financial system, while at the same time the Fed sees to it that the functions to print, create and use money do not destabilize the system and destroy the economy.
The Federal Reserve is a private institution, comes another declaration with so much audacity based on perception. It is supposedly owned by the 12 regional Federal Reserve banks, which “each in turn owned by a combination of regional banks, commercial banks, foreign banks, and miscellaneous individuals …” This is fiction, not “facts”. It is rather a convoluted presentation of facts if at all.
The facts: Fed is the Federal Government AND the participating private banks. The Federal Government [the Fed] is a composite of the Executive branch of government and Congress. The American people dictate the operation of the Fed through their representation in Congress and the president they elected to office that decide on what banking policies to formulate and implement. They all act through the Board of Governors.
The 12 regional banks do not own the Fed. The law does not say so. Rather these are the Fed’s regional arms. The Fed performs a governmental function, not a private function, and the participating bankers in the region are not there to enrich themselves in any way they want and anytime they like.
When a nosey face diagnosed the ills of our financial system at an arm’s length and faulted them all on the Federal Reserve, it presents a problem because hardly out of the "facts" discussed by "street experts" so far, were relevant to central banking, much more related to the role of the United States Federal Reserve in the national economy.
The problem here is that it reminds us of this old adage that “little knowledge is dangerous”. There is no space to explain this in details to those who need to know. The uninitiated has no fear of contradiction and will invade any territory of knowledge to cover up the absence of knowledge. Just like when the blind is fearless when crossing a busy street.
The blind can only feel but cannot see the danger ahead. If you believe the blind who tells you that he sees no danger ahead every time he crosses a busy street, you just missed the point -- the guy is blind!
Another reality check: Our gargantuan debts will continue to increase and will just remain I.O.Us. as the years go by, for as long as the United States of America continues to grow and grow. In this capitalist free enterprise society, the opportunity to grow is limitless … in Genesis, it ends at Alpha X [the beginning of infinity].
And why some people are shocked by the immensity of our national debt? It is because the educated guess of how “big” is this existing I.O.Us. is usually exaggerated. The conclusions derived from those exaggerations are viewed in a distant time at the wrong end of the telescope.
Even prices in a certain basket of goods and services that are centennial old, are compared to today’s CPIs to drop one’s jaw and create an alarming distress among the worrying segment of the population – our propensity to spend “beyond our means” is going out of control and we are navigating our future down the road to perdition!
We need to be disciplined, no doubt about that … to be frugal and parsimonious in the way we live our Starwar lives. But we must not also be extravagant in exposing that which we hardly know. It is obviously ludicrous if not appalling for limelight-huggers to mislead the public how bad we Americans had become – a conclusion which when compared to grandma’s gritting teeth is definitely neither normal nor true!
Those I.O.Us. are the material and social capital cost of what the United States of America had become to this day – the approximate worth of this wealthiest, mightiest and greatest nation ever seen on the planet at any given time.
In monetary measurement, the United States of America is now worth $63 trillion of consumer “investable” assets and/or total assets alone. Total wealth in the United States is published by the Federal Reserve in a report titled, Flow of Funds. At the end of fiscal year 2007, total wealth of all U.S. households and non-profit organizations was $57.718 trillion.
This neither includes intangibles and limitless potential callable capital resources that jump out of the book of accounting, nor does it include immeasurable natural endowments that are untapped on the surface and those that lie beneath.
There will be no collapse of the economy that toothless tigers pictured as worse than that of the 1920s. This gigantic U.S. economy is “unsinkable”, given what we have already gone through.
This preposterous claim that the national economy will go under may be categorized as a fantasy, a science fiction that if it persists to grind in the rumor mill may be filmed and nominated for this year's Academy Award! #
© Copyright Edwin A. Sumcad. Freedomsphoenix.com access January 23, 2009.
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 email@example.com