Lie Number 1:
He starts with a commentary on the Federal Reserve Transparency Act and says that "we need to keep politics away from monetary policy," and mentions that we had two centuries of repeated crisis due to the fact that the U.S. had no central bank until 1913. First of all we did have two central banks, each one destroyed by Congress by letting their charter expire without renewing it. Second of all, Geithner acts like after 1913 we have no disasters due to the Federal Reserve coming to save the day. How about the Great Depression, which arrived due to the Fed's inflationary policy of easy credit and an increasing money supply in the 1920's, creating a huge bubble that eventually popped in the crash of '29? And then too late, they decide to cut the money supply, deepening the deflationary spiral already gripping the economy. They do so again in 1936, sending us dipping into another recessionary period until the war breaks out and we ship all our unemployed overseas. How about the inflationary monetary policy that they pursued in the 60's and 70's that led to the coining of a new term: stagflation? The Federal Reserve was very complicit in easing credit to try to cover up a sour economy just to get Nixon elected for a second term. You can thank Chairman Arthur Burns for that weakness. And you can thank Alan Greenspan for the creating the housing bubble that just recently burst in 2006 by lowering rates down to 1%. Now we can watch Helicopter Ben pursue a policy of printing free money and raining dollar bills from the skies. Crisis hasn't stopped because of a Federal Reserve. They have solved nothing, but contributed greatly to every mess in the past century!
Lie 2: The Federal Reserve is independent and you don't want to let monetary policy become political.
Truth is there is a lot of politics at the Federal Reserve, and most of it has to do with collusion with the executive branch. Mariner Eccles was chairman during the Great Depression and WWII and was basically FDR's right hand man. But when he tried to break away from White House policy after the war and attempted to raise interest rates despite warnings from the White House, he was booted from his position in 1948. In 1951 Chairman William McChesney Martin had to negotiate for higher rates with the Treasury Department and only came to a compromise where rates could be pushed up slightly, but not high enough to stop inflation. Arthur Burns colluded with Nixon on the issue of interest rates. And recently Ben Bernanke had to pat himself on the back in Jackson Hole to campaign for his reappointment by Obama.
Lie 3: The loose monetary policy of the early 2000's responsible for the housing bubble was the fault of other countries. Not the U.S.
That is just outright stupid. Every central bank in the world follows closely what the U.S. Federal Reserve is doing and bases policy around U.S. policy. Foreign banks were irrelevant in a U.S. housing market that had gone loony, where prices for homes were rising on a weekly basis due to low interest rates perpetrated by the Federal Reserve.
Lie 4: Goldman Sachs' executives are great statesmen.
I am not even going to dignify a long response to the idea that Goldman Sachs' executives are great public statesmen and servants to some American ideal. I can only bang my head on the desk in front of me. And he says that we should never tolerate people in high government positions who use those positions to benefit private institutions. Isn't that why we are so angry now, Mr. Geithner?
Lie 5: The Obama administration is committed to decreasing the deficit.
The biggest lie of them all. In Geithner's eyes, all the blame falls on the prior administration. Yet he doesn't mention the fact that the stimulus plans, auto maker bailouts, health care reform, cash for clunkers and many, many more spending programs (all Obama's own policies) will only serve to increase our deficit over the course of the next ten years to about 2 trillion dollars or more per year.
In the words of Frau Farbissina:
Lies. All LIES!
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