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Thomas Palley on How to Fix the Fed

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The Roosevelt Institute hosted a conference yesterday on the future of the Federal Reserve, with the speakers including Joe Stiglitz, Jeff Madrick, Matt Yglesias, Joe Gagnon, Dennis Kelleher, Mike Konczal and Matt Stoller. Yours truly broke her Linda Evangelista rule to attend.

The discussion included the contradictions in the central bank’s various roles, its neglect of its duty to promote full employment, and its overly accommodative stance as a regulator, which has been enlarged thanks to Dodd Frank.

You can visit the Roosevelt site to view each of the three panels in full (they include the Q&As, which were very useful), the introductory remarks by Joe Stiglitz, or the presentations by each speaker separately. I encourage you to watch some of the panels, and to entice you, I’ve included videos from two talks I particularly liked below.

Thomas Palley put forward a very straightforward program for making the Fed more accountable:

Thomas Palley, Future of the Fed from Roosevelt Institute on Vimeo.

Another eye-opening presentation was Tim Canova’s discussion of how the Fed operated in World War II, which seems to be virtually expunged from official histories:

Tim Canova, Future of the Fed from Roosevelt Institute on Vimeo.

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46 comments

  1. financial matters

    Tim Canova:

    “to remember a period where the Fed was actually a virtuous, effective institution”

    “today’s Fed is a blatant affront to constitutional principles, the rule of law, democratic accountability”

  2. Three Wickets

    Thx. Look forward to watching on my desktop. Fed appears to be stoking inflation expectations (while monitoring real inflation) to spur investment from companies and spending from consumers. Wonder if it’ll work. Fed isn’t doing much more than that to raise employment. They seem to be leaving that to government which is obsessed about deficits, and their only plan for stimulus is the increase in medicare and social security payouts as boomers begin retiring. That and more defense spending. Doubt the Jobs Council will help much since corporations are mainly interested in leveraging technogies to cut labor costs and show good earnings. They also continue to offshore labor. Nobody seems to have a domestic jobs growth strategy. Not the private sector, not the government, not the Fed. Mostly they talk about innovations in productivity which again more often than not displaces existing jobs. It’s sad really. Fed pumps in two trillion, guarantees banks multiple trillions more, and the investor class gets most of the money and invests in themselves. No leadership in sight. Fubar for everyone else.

    1. Susan Truxes

      It is almost as if our government is pretending like it doesn’t understand the problem so as to extend more investment into the stock market at the expense of the rest of the country. We can’t blame Bernanke for this. He has appeared before congress on multiple occasions and emplored the senators and representatives to use fiscal policy and jump start the economy. They have refused to do anything except passively allow the Fed to be hijacked. And in the background a very strange and undeclared war is simmering in the Middle East and has been doing so for 10 years. Surely lots of the money is going into the black budget of the Pentagon; only some is going to the stock market as a red herring. This war has cost us multiple trillions and there is no accounting. And no visible progress.

  3. jake chase

    Couldn’t access the lectures, but the Fed has no purpose but to enable the giant banks, the banks have no mission but to manufacture phony profits (and very real bonuses) on derivative bets, so why is anyone surprised that the economy is crippled and the bankers are flush and the politicians who are bankrolled by the bankers are limited to cheerleading and excuses?

    Can’t wait for the next election cycle and the Obamacrits to begin insisting on his reelection since the Republicon alternative is vastly worse. Maybe the politicians will at least give us football, but I wouldn’t count on that either. The only serious question is how long the sheeple will put up with this and how determined their objections will be. I keep waiting for the big demonstrations. Where are they?

  4. Traderjoe

    Why does a sovereign country borrow its own currency – at interest – from private corporations?

    End the Fed.

  5. Tomk

    I was listening to Diane Rehm yesterday while raking gravel out of a billionaires lawn. Rehm had a group of jokers talking about the fed. A caller, a Paulist goldbug, spoke for a minute. The panel took turns snorting and dismissing,and finally one said something like this, “we couldn’t go back to a gold or silver standard, there isn’t enough coin in the world”, and I thought, “exactly”.

  6. Dean Sayers

    Once again, proof that the preeminent narrative on the economy is 100% false. FDR’s expansionary policies brought gov’t deficit spending to more than 30% GDP during the era in question – today, 10% is being touted as “dangerous.” And deficit spending isn’t even the issue as you pointed out recently – ‘current account balance’ reflects the dynamic that might induce a downgrade.

  7. Jim Haygood

    ‘Conventional economic theory would suggest that all that federal spending and federal borrowing will crowd out the private sector. It did not crowd out the private sector in the 1940s. During World War II we had 15 to 20 percent real growth rates.’ — Tim Canova

    This is a monstrous distortion of economic history. During WW II, the U.S. was run as a command economy.

    No crowding out of the private sector? U.S. auto production was entirely shut down and converted to armaments plants. No new cars were produced for the 1942-1945 model years.

    Consumers needed ration coupons to buy gasoline; to buy sugar; to buy tires; to buy coffee. Similarly, employed workers were strong-armed into buying government bonds at knock-down interest rates of 2.5%. The Fed collaborated with the Treasury to peg the unprecedentedly low wartime interest rate … which of course produced a nasty surge of pent-up inflation in the late 1940s, even as a recession struck.

    Thus, claiming that the private sector was not crowded out is an absurd lie. Its production, financing, and retail channels were comprehensively restricted and managed by the war production board and related agencies. Never in U.S. history was consumer choice so restricted, limited and impoverished.

    Some non-consumer industries, as the Homestake gold mine, were obliged to shut down (by explicit government order) so that their labor force could be impressed into the military. Homestake wasn’t merely ‘crowded out,’ it was padlocked.

    Canova’s grotesque apologia for centrally-planned war fascism is, I suppose, what one should expect from the Roosevelt Institute. Like several other presidents of the left elected on antiwar platforms, ranging from Woody Wilson to Peace Laureate O’Bomber, Roosevelt earned his undeserved reputation by presiding over bloody mass slaughter.

    Just as Prince William did today, Canova should exhibit his true colors by covering his bald dome with a shiny military cap and donning his polished jackboots. Central planning makes you free, comrades!

    1. IdahoSpud

      By contrast, in today’s corporatist-command economy, we had a million applicants for 50K jobs at McDonalds. If this is all a captured Fed has to offer, I would prefer the 1940′s policies.

      1. Cedric Regula

        Given the choice of being surrounded by Panzer tanks or burger grills, I pick the burger grills.

        1. IdahoSpud

          How odd …I could have sworn my comment was about “Fed policies” rather than “Nazi war machine”…

          But apparently we are better now that Rosie the riveter has been replaced with “would you like fries with that?”

    2. DownSouth

      Does socialism always degenerate into state socialism?

      Maybe so.

      But there’s another question that I don’t recall you ever asking, and that is: Does capitalism always degenerate into state capitalism?

      1. Anonymous Jones

        You can’t expect Jim to be as critical of his own ideas as everyone else’s. That’s not how it works…

        We all know what is “right.”

        We then take all the information that arrives, disregard the inconvenient bits and accumulate as many arguments as possible to justify what we knew was right all along. And then we deny that we’re doing this. And we claim everyone who disagrees is just stupid when it’s clear that there are extremely intelligent people holding diametrically opposed views on almost every subject.

      2. Jason Rines

        My macro opinion Downsouth:

        1) Demography drives destiny
        2) The Mercentilist/Globalization graft ships the means of production to another country. Then, the empire over expands and taxes the crap out of the middle class.

        The labels such as Fascism, Feudalism etc. are useful descriptions of the effects, but understanding the cause can protect one from loss of life or liberty.

        It is not a fair world but the Internet has been a huge plus to educate oneself if the deck was stacked against you at birth. Educating oneself in how to preserve your own personal life and liberty is the best protection against a group of muggers no matter what the label.

    3. dictateursanguinaire

      also, nice to hear Palley mentioning political economy. Yves, you posted something a while ago about that, I think? Something to the extent that in America that phrase used to have a distinctly Marxist tinge. Which is true and sad because it needn’t have that tinge and it shouldn’t be ignored. Shame that there are nowhere near enough people who know enough about politics and economics to successfully merge the two in their studies

    4. RebelEconomist

      I agree; the WWII period was anomalous. I suspect that the US could benefit from a larger state sector, but you don’t need potentially inflationary monetary policy to do that – how about some good old honest taxation and spending?

      Another aspect of the 1940s that is different from now is that the US then was recovering from a depression, with people being inclined to be cautious and accept less. And the US was still a rising power, with every prospect that any problems could be almost painlessly solved by growing resources. Now, the US is in relative decline, and it would be unwise to assume that living standards will naturally improve. I think speeches like Canova’s, and the cult of MMT, represent confused groping for magic solutions to America’s unaccustomed difficulties.

      Better to follow the example now being set by Germany, I would suggest.

  8. gf

    Maybe the “PRIVATE SECTOR” should be crowded out for a while.

    For the sake of the country. Perhaps?

    Still have not forgotten all your neo–liberal talking points, good recitation you should be congratulated on that.

  9. Francois T

    Canova alludes to the role of the DC Circuit Court in preventing a Constitutional resolution of the Fed regional presidents roles and rules of choosing on very procedural (a.k.a. unchallengeable by citizens) grounds.

    This is not the first time I read about the serial obfuscation, defilement and outright debauchery of constitutional principles by the DC Circuit Court of Appeals. They’re notoriously pro-National Security State with quite the disregard for human rights. A bit like the Cours Supérieures d’État who excused all the atrocities of the Vichy regime after WWII.

    Some legal eagle can help me understand what’s the deal with these Justices?

  10. steelhead23

    Yves, Thank you for posting this. Those of us who tend to view the current Federal Reserve system as a menace feel buoyed by criticism of the Fed by intellectuals. I would support Palley’s recommendations, particularly nationalization, but he had me at “Good Afternoon.” Beyond the rationality of those proposals, the larger question is: were any U.S. Representatives or Senators in the audience? For it is they who would have to perform the surgery. The Fed, a victim of its own ‘group think’ is incapable of self-reform. I offer this bit of advice to any Rep. or Senator interested in reforming the Fed so that events like 2008 would be less likely and smaller in scope, put forward legislation that forces the Fed to evaluate each of Palley’s recommendations and present a detailed report to Congress in 6 mo. including specific recommendations for reform. No, I would not expect the Fed to change its spots and propose substantial reform, their bankster buddies, the very proponents of the Fed’s group think, would oppose each of Palley’s recommended measures. But, the product would expose this thinking, it would be an avenue for intellectual debate, and could serve as a device for developing truly effective reform, which the U.S. Congress would have to force feed the Fed.

  11. F. Beard

    There should be no Fed. Period. The US Treasury should simply create, spend and tax its own interest free fiat. Nothing else. No borrowing of money. No lending of money. No recognition of any money but its own fiat.

    However, that fiat should only be legal tender, in fact as well as law, for government debts, taxes and fees, not private ones.

    Our monetary difficulties arise because we attempt to use a single money supply for both public and private debts. Not only is that completely unnecessary but it is also ethically impossible since the state is force and the private sector is voluntary exchange.

    Someone else desires that we only have a single money supply – the fascist gold-bugs. If the Progressives do not abandon that idea themselves then they risk an all-gold money supply by their enemies.

    1. Susan Truxes

      Why do you challenge the Progresives? Since when are Progressives fascists? When I was 15 Peter Szymanski accused me of being a fascist. I hurried upstairs to the library and looked up the word. I didn’t understand any part of the definition. And full circle, now I’m 65, I still don’t understand it. It’s like the book, same author as Blade Runner, can’t remember his name, but he also wrote The Man in the High Tower in which he fictitonalized this very confusion. Fascist, fascist, who is the fascist. I think the idea of separate money systems is a really tantalizing idea. Just don’t know how it would work, especially if all the progressives are the fascists.

      1. F. Beard

        I think the idea of separate money systems is a really tantalizing idea. Susan Truxes

        Thanks! It is consistent with Scripture (Matthew 22:16-22), libertarian principles and common-sense for that matter. For instance – is Lowes allowed to issue store coupons for Home Depot? Then why should the government be allowed to issue money for private debts?

        Just don’t know how it would work, especially if all the progressives are the fascists. Susan Truxes

        I don’t accuse the Progressives of being fascists, only of playing into the hands of fascists.

        My point is that if the Progressives don’t embrace true monetary reform then they risk the fascist gold-bugs implementing their so-called reform – a government enforced gold standard.

        My definition of fascism is government privilege for private interests such as the relationship that now exists between the US Government and banks.

        1. Susan Truxes

          but even the banks think gold is a joke; not even a joke – just a punchline. As the old song went about another barbaric relic (war): “…what is it good for? absolutely nothin’.

          1. F. Beard

            but even the banks think gold is a joke; Susan Truxes

            What the banks really hate is any source of money creation outside their own hands. I’m sure they would prefer a government enforced gold standard to allowing the population true liberty in private money creation. Anything but that since it would spell their eventual doom.

      2. Jason Rines

        Progressives are often considered Marxist for condoning government taking money from one group and giving it to another.

        My friend Nate is an English Professor and a Liberal. He didn’t care if it was wrong for government to take from one group and give to another. He doesn’t care because he is a benefactor of these politics.

        Fascism is public-private partnerships and even simpler, government subsidizing favorite industries which line their own political and personal coffers.

        America is Fascist or corporatist right now and this was the case in the 1930′s as someone else here pointed out. It has leaned toward Marxism at times using one vote, one dollar policies.

        You could just say that both models are socialism, one tends to provide welfare for corporations and the other toward the people. Either way, both are what simply considered called stealing from the productive. The question Qui Bono should always be asked if your in the productive class, grow and prosper without cheating.

        1. F. Beard

          You could just say that both models are socialism, one tends to provide welfare for corporations and the other toward the people. Jason Rines

          True but I point out that before the fascist money system destroyed the economy in the 1920′s and 30′s there was little need for socialism in the US.

          Either way, both are what simply considered called stealing from the productive. Jason Rines

          Not necessarily. Transfer payments from the rich to the poor could be considered a form of restitution and it would be no skin off the noses of the productive classes either. In fact, those transfer payments are what is keeping the American economy alive today.

          1. Jason Rines

            You and I are not far apart in our thinking F.Beard about monetary systems.

            The rich do transfer wealth to the lower classes, its called ‘investing’. But they stopped investing here or malinvested on speculation led by the Fed.

            The rich will invest when they can get a better ROI here than overseas. Currently, government is the obstacle. China is inside leadership and American financeers new baby. They see no hurry to accelerate competition of their new baby.

            “Competition is a sin; therefore you must destroy it.”
            John D. Rockefeller

        2. dictateursanguinaire

          “Progressives are often considered Marxist for condoning government taking money from one group and giving it to another.”

          Okay, let’s start here. First: a lot of people on this page have basic or advanced degrees in political science or economics, i.e. they actually know what the term “Marxist” means. Anyone who thinks that progressives (who think that capitalism is fundamentally good but not perfect) and Marxists (who think that capitalism is fundamentally bad) have anything in common, beyond thinking that capitalism is not absolutely perfect, is ignorant. You might be able to just wantonly conflate “Marxist”, “liberal”, “progressive” etc. when you’re talking to people who don’t know what they’re talking about, but don’t try pulling that here.

          “My friend Nate is an English Professor and a Liberal. He didn’t care if it was wrong for government to take from one group and give to another. He doesn’t care because he is a benefactor of these politics.”

          Oh jeez. So, not only does your friend think, horror of horrors, that public funding for education is not fundamentally wrong, he clearly must believe that is wrong. Yet, he simply goes along with it because it pays his salary, because, simply put, people who believe in any sort of public funding must be welfare queen hypocrites.

          “Fascism is public-private partnerships and even simpler, government subsidizing favorite industries which line their own political and personal coffers.”

          http://en.wikipedia.org/wiki/The_Global_Fund_to_Fight_AIDS,_Tuberculosis_%26_Malaria

          ^ an example of a public private partnership. I did not realize that AIDS activists were devotees of Benito Mussolini and Getulio Vargas. I won’t argue with your second point, but government corruption is not synonymous with government. In America, with our rotten political culture, it’s easy to think that. But if you’ve ever lived anywhere else in the world, you might realize that other countries’ governments can be highly efficient, possibly because the populace is actually engaged in other countries instead of using “Atlas Shrugged” as an excuse for not paying attention to anything.

          “America is Fascist or corporatist right now and this was the case in the 1930’s as someone else here pointed out. It has leaned toward Marxism at times using one vote, one dollar policies.”

          The first sentence is just wrong. There’s no other way to say it. Public spending on the economy does not equal fascism, and you would have to be almost entirely ignorant of economics to think that. The constant comparisons to fascism are silly as well. Try looking up “Godwin’s law” on Wikipedia. And Marxism? Are you out of your mind? First of all, no president in this country has ever been farther than center-left. Perhaps for people who do not understand political theory, center-left = Marxist, but that does not make it correct. Ask any libertarian professor of political science if that is correct. They may not like liberals and Marxists but they will certainly tell you that there is a vast difference between them. And one vote, one dollar is a concept that has no relevance to Marxism because Marxist governments did not even allow for elections, much less corporate spending on them.

          “You could just say that both models are socialism, one tends to provide welfare for corporations and the other toward the people.”

          Well, wrong yet again. Socialism means that the means of production are held by the state. Capitalist economies with welfare spending do not constitute socialism. How hard is that concept to understand? Sweden’s economy is freer economically than ours, yet their welfare spending is much higher. Does that make them “socialist”?

          “Either way, both are what simply considered called stealing from the productive.”

          Uh, who’s the fascist Marxist here again? Surely not the person using “parasite-producer” rhetoric. And stealing? If you don’t like paying the lowest tax rate of the century, leave. If you can do so well without society, then go live in the Yukon and sell financial services to the moose.

          “The question Qui Bono should always be asked if your in the productive class, grow and prosper without cheating.”

          Guess the famous figure in history whose favorite expression was “Qui [sic] Bono”! Hint: his first and middle names are Vladimir and Ilyich. Again, productive class. Are you for real? That sort of rhetoric is straight out the Communist Manifesto. You fall prey to the same basic mistakes that Marxist make, i.e. that there is one “productive” class and one “parasite” class and if we just kill the parasites, everything will be swell. Wrong. Wrong wrong wrong. Most people in this economy produce wealth. Some of us have more opportunities than others. The world is not fair. Our economy is not totally fair. We need to look out for everyone, not talk about “producers” and “parasites.”

          1. Jason Rines

            Actual Dictator, I don’t prescribe to either/or paradigms (parasite or producer). I have read Marx. The public opinion about what Marxism is does not mean it is my own. I do not consider myself Liberal or Conservative. To me policy should depend on need (not want).

            My friend Nate is merely an honest Liberal. He tells me he doesn’t CARE that having government force one group to pay for another. That he works at university is no surprise. Those that can’t do teach.

            My main point is that both Fascism and Marxism are socialist policies. Sure, government CAN invest and get some returns such as in R&D. But how about now? You going to tell me Dictator that the American government spending massive deficit wads in clumsily recapitilizing banks or further funding inside Sr. leadership’s pe investments in China is providing return? 1.5 T deficit for 1.8 GDP.

            I don’t need to leave and go to the Yukon. Maybe I will go on the dole like my ex friend Chris on his third year of what he calls ‘vacation’. Meanwhile my UI rate went from 3% to 8%. I think I’ll follow the path of Bhudda and have YOU pay for it? I am a tax payer and worked for several big name politicians in fund raising, advising President Bush in 2008. You’re going to speak to me Dictator as if I am ignorant? My email is jrines@ragingdebate.com. You want to have a real debate with me? Great! I built a tech just for this purpose. I will gladly eat your lunch, let me know.

        3. F. Beard

          The question Qui Bono should always be asked if your in the productive class, grow and prosper without cheating. Jason Rines

          I’m afraid very few are truly innocent including those among “the productive class”. Every loan from the counterfeiting cartel, the banking system, is theft of purchasing power from all money holders including and especially the poor who are usually not considered “credit-worth” themselves.

          How many have not borrowed from the counterfeiting cartel? Very, very few is my guess.

  12. Max424

    18% growth, 1.8% unemployment, and basically, ZERO inflation.

    WHO WANTS THAT!!! Answer: Nobody.

    Like all economists, I prefer no growth, 20% underemployment, and stats like: The cost of a college education has increased 900% since 1978.

    900%! Isn’t that remarkable! What other country could achieve 900% growth rate (in anything)! Answer: No other country.

    First Rule of Economics: Don’t ever (EVER!) discuss World War II. If people found out the truth, the economics profession would return to the place from whence it came — the dustbin.

    Note: The Second Rule of Economics is: Don’t ever (EVER!) discuss the GI Bill in detail. That would also let the — proverbial — cat out of the bag, and cause instant professional death.

  13. F. Beard

    Let me make it plain to Liberals and Progressives – While the banking system needs the government, the government does not need the banking system. Not at all.

    Why? Because for taxes and fees the government could easily issue its own interest-free fiat. And as for taxing the private economy, that would be easy too since every private currency of consequence would have its own free market exchange rate with the government’s fiat.

    Separate government and private currencies is a win-win. The private sector would benefit from sound money supplies and the government would benefit from a healthy economy to tax and from reduced need for its social services.

    And I won’t neglect to point out that the idea of separate government and private money supplies is Scriptural – Matthew 22:16-22.

  14. Cedric Regula

    I see everyone is as speechless as I over Thomas Palley.

    I watched the “game plan???” and was waiting for him to reach behind his neck, grab his zipper, and peel back his skull cover so I could use my “Guide to Identifying Space Aliens” and determine what sector and exact point in the space-time continuum he has been residing in.

    P.S. I’m more of a Stiglitz fan.

  15. James

    Give me campaign finance reform and I’ll give you a world in which it is politically possible to “fix” the Fed. Ain’t gonna happen. It’s a Möbius of corrupt human nature caused by mass apathy in the voting population that keeps informed, ethical persons from gaining the ability to do anything about said corruption. American culture as a whole will prove at last that people are lazy and stupid and that given the chance to rule themselves people will inevitably concede that power to the first person(s) willing to come up with a strategy just cunning enough to overcome their laziness and poor will. I’ve never even read Nietzsche; that’s just how I feel.

    1. F. Beard

      Don’t blame the people. Money is a mind boggling topic. Even today very few understand it. The height of wisdom in many parts is considered a return to a government enforced gold standard! That’s how bad the current system has screwed up – that we would rape the Amazon for mere money tokens.

  16. dictateursanguinaire

    @Jason

    I can’t tell what’s worse – that you expect me to believe you advised Bush or that you think that that factoid would somehow boost your libertarian credentials. Bush is truly the closest to a fascist president that this country has had in my lifetime.

  17. F. Beard

    The rich do transfer wealth to the lower classes, its called ‘investing’. Jason Rines

    That depends. If the rich invest only their own capital then that is legitimate. But if they borrow from the government enforced counterfeiting cartel then the purchasing power for those loans is stolen from all money holders including and especially the poor who are usually not considered “credit-worthy” themselves.

    But they stopped investing here or malinvested on speculation led by the Fed. Jason Rines

    They fouled their own nest and caused their own “dearth of investment opportunities” by robbing their fellow countrymen.

    The rich will invest when they can get a better ROI here than overseas. Jason Rines

    They had best lobby for fundamental reform then so that the US can start to practice genuine capitalism.

    Currently, government is the obstacle. China is inside leadership and American financeers new baby. They see no hurry to accelerate competition of their new baby. Jason Rines

    I’m sure the elites of France felt no hurry either till it was too late for them.

    “Competition is a sin; therefore you must destroy it.”
    John D. Rockefeller
    Jason Rines

    I’ve read nearly the entire Bible and have read no such thing. However, usury from one’s fellow countrymen, theft and oppression of the poor are sins.

  18. Henry

    Haywood calls the pegged period a “monstrous distortion” and throws epithets like fascist at Canova. Really? This is typical of Fed apologists claiming there was crowding out because no autos were produced during World War II. I guess all those aircraft carriers and tanks and bombers were not real, had no positive economic effects. The 1.2 percent unemployment and booming labor market and booming corporate profits and paying down of private debt, none of that was real either? And that was only the first half of the pegged period. The second half brought the G.I. Bill and Marshall Plan. Are we to assume that all those veterans who received college educations and jobs and housing were not receiving real economic goods. No, government spending did not crowd out the private economy, but redirected the private economy in socially useful and necessary directions. Yes, consumer choice was limited, and collective action was empowered, and what bothers people like Haywood is that the collective action was directed by means of democratic processes, and not by Communist or Fascist central planning. In Haywood’s world, consumers didn’t get strong armed into subprime mortgages, that was free choice. But consumers who purchased War Bonds and Liberty Bonds were somehow not free citizens choosing their investments based on a range of considerations, including love of country instead of love of money.

    The pent up inflation in the late 1940s that Haywood mentions lasted all of one year, and then prices started falling. What Haywood has trouble wrapping his mind around is that all those war factories were converted back to civilian production and that the increased supply (industrial capacity) actually reduced inflationary pressures.

    Haywood’s view of Roosevelt is also ridiculous. Without U.S. entry into World War II, the reign of Hitler and Tojo and Mussolini would have lasted an awfully long time and would have drowned the world in far more bloodshed and mass murder. Haywood throws cheap insults at serious ideas, and ends up serving as an apologist for actual tyrants like Hitler. If Haywood had been around in the 1940s, he would have been more than an apologist. He would have been an enabler of the jackboot.

    The point of Canova’s presentation is that the federal government is capable of financing real economic development, as it did after the war with the space program, and all the economic spinoffs that followed in information technologies, computerization, and even the internet which was developed by the Defense Department. Unfortunately, it’s countries like China that have been following this model for the past decade while the USA continues to subsidize a parasitic Wall Street financial model instead.

  19. Paul Tioxon

    Tim Canova illuminates a forgotten historical period but also identifies the distinguishing characteristic between today’s CAPTURED Federal Reserve with its attenuated policies vs the Fed of The Atlantic Charter. Who captured the Fed, how was it captured and whose service does it labor under? You have to do more than just follow the money in this case because this is the creator of money, you have to follow the political appointments and the people elected who can make these decisions. And you need to follow what ideological advocacy organized, a political movement that resulted in domination by business interests for wealth concentration at the expense of political power sharing with a broader American Public, in the wake of WWII.

    An answer to the question of who took the Federal Reserve away from building a world free from want, free from fear of military aggression, free from despair of living powerless, a few of the principles of the Atlantic Charter that guided post WWII policies, can begin with a memo to US Chamber of Commerce. Shortly before becoming a Justice of the Supreme Court, Louis Powell was part of an ongoing policy discussion group which fought to overturn the National Labor Relation Board’s ruling that outsourcing by corporate management WAS a breach of union contracts and to place this issue beyond the collective bargaining terms of negotiable issues. It was management’s decision and prerogative, that was not up for discussion, among many other items, when dealing with union negotiating teams. His political activism on behalf of taking back what was perceived to be diminishing power and profits of the business community and its owners was articulated in a written memo. In it, he sketches a broad outline of a plan of action to build the necessary political infrastructure to build a militant right wing movement of conservative activists who research, discuss, inform, educated and then advocate public policy decisions favorable exclusively for business. It would serve as a talent pool for people who could not only advise the elected officials, but serve as appointees in critical positions within government to ensure decisions would be consistent with their corporate goals. People such as himself. His memo to the US Chamber of Commerce lead directly to the founding of well known right wing think tanks, such as The American Enterprise Institute, The Cato Institute as well as their continuous and generous funding.

    The Powell Memo can be read here:

    http://reclaimdemocracy.org/corporate_accountability/powell_memo_lewis.html

    Over the last 40 years, fueled by a united front of policy driven political assaults, corporate business interest has dominating the political process of the major institutions of America, the Federal Reserve included. It did not just change by accident or by the logic of some structural element of our social order. It was deliberate, thought out but most of all,a common effort on behalf of business, lead by the Business Round Table, The US Chamber of Commerce and funded by some of the wealthiest American families and their foundations.

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