Blog/America's Economic History
Posted Nov 13, 2015 by Martin Armstrong
QUESTION: the big question: WHY do USA still have the FED (a private company) dictating the USA economy?????????
ANSWER: Very simple. The Fed was originally a private bailout entity to replace J.P. Morgan and what he did during the panic of 1907. Stimulation occurred through buying corporate paper. When WWI came, Congress ordered the Fed to buy government paper; not corporate. They never returned it to its original design. When Great Depression came, Congress usurped all branches and established a single national interest rate. They ordered the Fed to support U.S. debt at par during WWII but removed that in 1951.
The answer is very simple: Congress gets to blame the Fed for inflation because the definition is an increase in money supply, which is the Fed’s job. Meanwhile, Congress relieves itself of any responsibility for inflation and fiscal management. Everyone focuses on the Fed and not on the fact that Congress creates the bulk of the money by debt.
It’s a blame game that relieves Congress of any responsibility. They get to hold hearings and interrogate everyone except themselves. They tell everyone to blame the Fed and they run for office and promise the moon. The Fed is nothing like what it was supposed to be. The elastic money was to allow it to stimulate buying corporate paper that was at least repaid. Once that became government paper, the game was changed. Roosevelt even confiscated the gold from the Fed in 1933 just like all other banks.
So it works. So many people hate the Fed, but they do not look at who really creates the bulk of the money – CONGRESS. It is very naive to think that shutting down the Fed that would solve everything. The problem runs much deeper.