Tag Archives: democratic agenda

Class Warfare And The Federal Reserve

The administration oozes daily rhetoric about issues and concerns that focuses on the allegation that there are different classes in the US and that those at the top of the socio-economic spectrum are taking advantage of those the WH deems not receiving a fair shake.   It is a class warfare campaign and has strong populists overtones.  We’ve seen this movie before in our history–actually several times.   There were the same arguments between Adams and Jefferson in the very earliest days.   Similar arguments were made by T. Roosevelt to some extent and the really hammered by Woodrow Wilson and then of course FDR.  Surely everyone remembers Williams Jennings Bryant and his cross of gold message.   No one was more anti-elite in rhetoric than Harry Truman yet his administration was filled with exactly those types in all positions  of influence.   Now we are hearing the same theme again. 

Those adopting this line always rail against Wall Street, “moneyed interest” , bankers or the alleged privileged and well-connected.  What is always interesting about these arguments is that they are advanced by those who are in fact part of the 1% and among the elites themselves and are usually surrounded by elites a la the current administration.   Bankers are always at the top of the list of those attacked because they control some of the flow of money.   Jefferson opposed the original bank of america but Hamilton won the argument with Washington and it was created and then died shortly thereafter due in part to the same old argument that it favored and worked only for the benefit of the wealthy.    Well of course banks do deal with those who have some money.  Money is their business so is it surprising that they mostly interact with those who have money to deposit or wish to float a loan. 

We created the Second Bank of the US in 1816 under Madison but it only had a 20 year charter.   It was conservative and restricted credit to those who were credit worthy and the banking system functioned quite well during this period.  We grew and prospered.  The economic growth was uneven and the common man didn’t directly benefit that much from the bank but they sure did overall because the overall economy was improving steadily in the long view.   The class warfare rhetoric rose again to the fore when Andrew Jackson ran for President.  He was rough and tumble and came from modest backgrounds and sure had “baggage”.  I mean how many men today would have a chance to be President that had been involved in duels and even killed men doing so?  What about being a bigamist which he was technically.   Makes Newt look like a choir boy by comparison.   But elected he was.  He didn’t like the Second Bank or the bankers in general.  There was a strong geographic element to the class warfare talk of that day because the populists were mostly from the South and the West.  It was the elites and money interest of the East that were the target.   That remained true for generations.  Somewhat ironic today that those mostly shouting the class warfare language are from the elite East where the money interest still reside.   The big banks then just as today were mostly in the East because that is where the big money was.  The money came from the trade of the big ports of the East and the fledgling industrial growth of that nation which was concentrated in the area. 

When the charter for the Second Bank came up for renewal Jackson vetoed the bill.  He took the reasonable position that it was unconstitutional since it was not a power granted to Congress under the Constitution and that foreign interests profited too much and influenced it too much with their money.  He also said it favored the East over the other regions of the country which was mostly true and that it only made those rich bankers get richer.  He chose to ignore the fact that even though those things might be true we were growing, expanding and had a great GDP for those days.   He was a very determined warrior against the Bank and even before it formal demise in 1836 he withdrew the funds of the US from the Bank and deposited them with local and regional banks.    Those banks in turn began to practice what we would call easy credit and the loans flew out the doors and the speculations especially in western lands took off again.  Those bank issued paper money supposedly backed by gold.  The speculation became so intense that even Jackson got concerned and required in future that all land purchases had to be paid for in “specie” gold and silver.  That naturally caused an immediate credit crunch.  People started wanting to withdraw their money from the banks by submitting their paper money for gold or silve and the banks couldn’t meet the demand and many of them collapsed.  That led to a great panic of 1837 and a severe depression which lasted well into the next decade.  

Monetary and fiscal policies are critical to the proper functioning of our economy and yes those policies will always have to be implemented by banks and bankers.   We must have them.  We can’t run our economy without them because then you would be left with an anarchic trade  and barter system which is not very efficient or practical.   The Federal Reserve system doesn’t “favor” the rich currently.  It favors us all.   The Federal Reserve system is no inherently evil or there only to enrich the 1% as established.  It was set up to be run by bankers with only limited political influence through the board.  The Fed isn’t our problem it is the politicians wanting to tinker with it and control it even more.  I sure don’t like many of the things it has done in the last few years and don’t like most of the current members of the board and especially Bernancke.  But do you want the politicians to have even more control over our monetary policy?   You want the politicians with a simple vote or threat of reprisal or regulation to control the money flow and money supply.  Ever time there was the slightest advantage for some more inflation to make people feel good temporarily they would be opening the spigots.  If anything we need more independence of the Federal Reserve board.  We need more members who elected by the regional banks and fewer appointed by the politicians in Washington of whatever party.   Before all those 99% ers destroy the Wall Street banks we best think long and hard about what will replace them.  There will have to be something to replace them for sure.  I would not want Barney Frank to control our monetary policy and would not want Dodd to be in charge of the money flow from the Federal Reserve or Elizabeth Warren to be the regulator of banks around the country.    It ain’t perfect by a long shot but it has served us pretty darn well for almost a century.   We can have bankers or czars.  I’ll take the bankers any day.  At least they can be sued for fraud and set to jail for criminal acts but czars?   It takes revolution to get rid of them if my remembrance of history is correct.   An important aside–Jackson before he went off the rails did pay off the entire national debt only to have it balloon again after the closure of the Second Bank.   If only….

“If a national debt is considered a blessing, then we can get on by borrowing.   But as I believe it is a national curse, my vow shall be to pay the national debt.  A. Jackson.   www.olcranky.wordpress.com

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Government And The Zero Sum Game

We all endured another of those showy state of the union addresses.  I really don’t like what they have become and have said so before.  Regardless of party or President we should revert to the former ways and have a simple written report to Congress by the Executive.  If they really want a meeting it should be a business meeting.  Bring in the books and records.  Go over those boring but vital details about the costs and functioning of government.  The political speeches have been the norm now for generations and they are pointless and detract from the serious business at hand of governing.  As to be expected from the current incumbent it was a laundry list of new proposals.   I lost count of how many new agencies, commissions and the like were put forth.  Every time there is a new government entity with the powers to enforce new laws we diminish our own freedoms.  The balance between the individual and government is and has always been a zero sum game.

Other than the extreme tree huggers, occupiers and PETA types most of us believe in some amount of government.  That has been true since the earliest days of man.  As soon as we formed cities and some could do other jobs than work the fields for crops, we needed some kind of government to protest ourselves.  That was the first and remains the foremost responsibility of any government–to protect its people from enemies.  The ancient Kings had a bargain with the people even though never overtly expressed.  Me and my army will protect you and in exchange you will pay taxes to support me and my army and ministers.  From those ancient states to those states of today, this has been the bedrock of government whether by King, dictator or elected leader.  Additional layers of government were added to assure prosperity.  Fair and predictable laws for trade  as well as enforcement of standard weights and measures for commerce.   Property rights and family law were established quickly by the ancients and the Romans codified and modified those laws many times over the years.   The criminal laws grew from the mutual fear of random violence and thievery.  The Old Testament is filled with many examples of the growth of government and the laws regulating society.

Each incremental growth of government took away some freedom or right from the individual.   We collectively agreed to cede some of our independence for the protections afforded by a government that protected some people and offered some perceived essential service or infrastructure.  The Roman army built the roads but all of the Romans were benefitted by being able to move the produce to market.   The people had to pay taxes for those roads.  Since the Garden of Eden, nothing has come free.  But they people gave up control over some of their money.  If the government grows the people are diminished in matching increments.  When the benefits are no longer perceived to be worth the loss of rights and property then the government faces revolt by its people.   The collapse of the Soviets is a perfect example of this and the Arab Spring is another from recent headlines.  There is a limit to what the people will allow to be taken from them.  It is not universal around the world.  The mores of each society differ but that there is a limit is without argument.  The “King” must have at least a substantial minority to keep control of the government and the people.   He has his army, bureaucrats dependent on him  and the police and then those that live upon his largesse taken from others in the Kingdom.  But when the tipping point is reached and that magic number (whatever it is) is reached and the people no longer will cede their rights and property to government his reign will fall.

Our government and Constitution is founded on the very notion of limiting how much of our freedoms and property will be ceded to government.  That is what the contract is as set out in the Constitution between governed and government.  Our Founders understood clearly the zero sum game and that is why the Constitution is so restrictive of Federal powers.  Only specific enumerated powers were granted to government and the 9th and 10th Amendments were vital to the passage of the Constitution.  Remember that every law written takes a right of restricts and activity, every regulation bans action or demands others every cent taken in taxes denies a person the free use and exploitation of their own money.  The trick is to find the right balance between the government and governed so that the benefits of government are worth the candle and not consuming us in the flames of regulatory hell.  No rational person would advocate anarchy but any man who values his freedom and takes pride in his own unique worth will wish the government to remain at bay and be very circumspect in its request to take more rights or property from him.  Too many take today but too few pay the price of government.  The zero sum game is tilted and tilting farther in favor of government.  When tilted enough everything will fall off the table.

“More” was the word of Oliver Twist  Samuel Gompers the Union boss and now our own government.   Are we willing to give more now?  There is only a finite amount of resources in the US and the government wants more and they can only get it by denying them to us.   www.olcranky.wordpress.com

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