Greenspan attempts to choose a president
By Charles A. Morse
web
posted November 27, 2000
Veteran
syndicated columnist Robert D. Novak, in his column "Is Greenspan
a secret pal to Al Gore?"(11/22), states that "serious Fed watchers"
believe that Federal Reserve Chairman Alan Greenspan is "secretly
rooting for Al Gore against George W. Bush." Does this mean that
Greenspan, acting in his capacity as Chairman of the Fed, is trying to
influence the selection of our next President? Would it not be unreasonable
to assume that whichever candidate Greenspan favors, if elected, would
be beholden to him and the Fed, America's self described Central Bank?
How much, if any, influence, of a likewise nature does the Fed wield over
Congress? What is this presumed power of the Fed, a cartel of appointed
private citizens, over our elected officials?
Novak points out that Greenspan maintained a friendly relationship with the Clinton Administration during the last 8 years and a "frosty" relationship with the previous Bush Administration. Officials in the Bush Administration believed that Greenspan was responsible for Bush's defeat to Clinton in 1992. The impression was that Greenspan's tight monetary policy was not favorable to Bush Sr's election chances that year. The theory is that revenge for this perceived action by the Fed could be exacted by Bush Jr. when he names, if elected, four of the seven Fed governors. In 1992 the Fed appeared to be playing a fierce insider political game. If these contentions were true, than the Fed was using our economy, and our livelihood, as a political football. The insinuation is that there doing it again this year.
Tight money means higher interest rates which are determined by the Fed and result in less currency in the economy. With less currency than needed to match production, prices and unemployment go up and deflation ensues. Interest rates lower than production means too much currency and the result is inflation.
Last week, Greenspan chaired the Fed's secretive Open Market Committee meeting. With regard to this meeting, Novak states the following:
"Citing dubious inflationary pressures, the Central Bank's policy making body maintained it's 'bias' for tightening money when capital markets actually need lower interest rates."
This means that Greenspan and the committee decided to maintain higher interest rates thus limiting the supply of currency in relation to production and risking a deflationary cycle. Given the contention that the "capital markets actually need lower interest rates", it is reasonable to raise the question of motivation with regard to the Fed's policy. Is the Fed acting for sound economic reasons or are there political considerations.
The Fed was granted monopoly power to determine interest rates by Congress back in 1913 with the passage of the Federal Reserve Act. By controlling the interest rate, the Fed controls capital accumulation, and, therefore, to an astonishing degree, influences our entire economy. This private cartel of bankers, businessmen and investors is answerable to the parties involved and not to the national economy. The private shareholders of the ten Federal Reserve banks decide what's best for our economy and themselves, not our elected officials in Congress.
Former Sec. of Labor Robert B. Reich was questioned by a caller to the Boston NPR radio broadcast "the Connection" about a year ago concerning the Clinton Administration's influence on the Fed and it's policies. Sec. Reich stated that it was "against my religion" to comment at all on the Fed. When pressed on the matter, Reich stated that the Administration leaves matters pertaining to money up to the Fed and stays clear of these issues.
If a sitting President and member of his cabinet chooses to stay clear
of matters pertaining to money, yielding questions of monetary policy
to the Fed, who is really in control of the country? A reasonable assumption
is that those who control the money control the country. While there are
sound reasons for a Federal Reserve system, the system seems to have assumed
so much power that it controls the government itself. This is a situation
requiring Congressional intervention and reform. We must insist that the
Fed stand subordinate to our elected officials, those impaneled to represent
our interest by virtue of election, not the other way around. 
Chuck Morse is the author of the new book Thunder out of Boston.
Other related articles: (open in a new window)
- Half pregnant with the Fed by Gerard Jackson (October 18, 1999)
- Greenspan is no hero by C.W. Mayer (December 1998)