No wonder the policies of the Federal Reserve are so widely
misunderstood: in many ways the Fed is like an iceberg, with its public
pronouncements being only the visible 10 percent above water. The real
mass of the Fed’s actions lies beneath the surface, invisible to us mere
citizens.
Consider the Fed’s public mandate, which is to “promote stable prices, maximum sustainable output and employment.” This is solid public relations, selflessly focused on the good of the nation, but it’s also deeply disingenuous, as the Fed’s less PR-pretty agenda is rather obviously to preserve the banking sector’s profits and power.
We can find clues to the Fed’s real goals in its actions behind closed doors—the 90 percent of the iceberg that’s out of public view.
On the surface, the Fed has increased its balance sheet by about $2 trillion since the 2008 global financial crisis. This electronically created money purchased about $1.1 trillion in mortgage-backed securities (MBS) to support the housing market and $1 trillion in Treasury bonds to keep interest rates low. These two goals—super-low interest rates (also known as “zero interest rate policy,” or ZIRP) and supporting assets such as housing and stocks—are the core strategies the Fed publicly deploys to boost growth and employment.
Supporting the banks is not mentioned, for obvious PR reasons. Yet a Government Accountability Office audit found that the Fed provided $16.1 trillion in “emergency program” loans to global banks from 2007 to 2010. A Levy Institute study uncovered a total of $29 trillion in Fed support—roughly ten times larger than the Fed’s public programs. For context, the annual U.S. gross domestic product is about $15 trillion.
Read more: http://www.theamericanconservative.com/articles/an-iceberg-called-bernanke/
Consider the Fed’s public mandate, which is to “promote stable prices, maximum sustainable output and employment.” This is solid public relations, selflessly focused on the good of the nation, but it’s also deeply disingenuous, as the Fed’s less PR-pretty agenda is rather obviously to preserve the banking sector’s profits and power.
We can find clues to the Fed’s real goals in its actions behind closed doors—the 90 percent of the iceberg that’s out of public view.
On the surface, the Fed has increased its balance sheet by about $2 trillion since the 2008 global financial crisis. This electronically created money purchased about $1.1 trillion in mortgage-backed securities (MBS) to support the housing market and $1 trillion in Treasury bonds to keep interest rates low. These two goals—super-low interest rates (also known as “zero interest rate policy,” or ZIRP) and supporting assets such as housing and stocks—are the core strategies the Fed publicly deploys to boost growth and employment.
Supporting the banks is not mentioned, for obvious PR reasons. Yet a Government Accountability Office audit found that the Fed provided $16.1 trillion in “emergency program” loans to global banks from 2007 to 2010. A Levy Institute study uncovered a total of $29 trillion in Fed support—roughly ten times larger than the Fed’s public programs. For context, the annual U.S. gross domestic product is about $15 trillion.
Read more: http://www.theamericanconservative.com/articles/an-iceberg-called-bernanke/
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