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Washington Post Article Identifies FED Chairman as #2 in Power

Written by Gary North on September 23, 2013

In an article describing the Federal Reserve System, the author comes to this conclusion:

Oh, you want power rankings? I’d put the Fed chair at the second most powerful person in the United States. The president comes first. But consider the alternatives for the No. 2 slot: The vice president’s only formal power is to break ties in the Senate; the president can choose to ignore and marginalize him. High Cabinet officials like the secretaries of state and defense take their orders from, and serve at the pleasure of, the president. Similarly, you could make a case for White House chief of staff, but that position is basically a vessel for carrying out the president’s wishes. The chief justice of the Supreme Court is both powerful and independent, but is much more likely to be outvoted by peers than is the Fed chair.

I think this is correct.

The article also offers this bit of information: the FED employs 20,000 people. When you think of the FED as the #1 employment opportunity for Ph.D-holding economists, you can understand why economists outside the Austrian School Never criticize it as a government-created cartel, which by all textbook standards of cartels, it clearly is.

Then there is the hierarchy of power. Does the President control the FED? The article says no. This is correct. Does Congress control the FED? The article says no.

Congress can yell at them to do this or that (indeed, legally the Fed chair must go before Congress at least twice a year, and in practice it’s usually more often than that). But Congress can’t fire them, either.

And unlike most agencies, Congress can’t even mess with the Fed by threatening to withhold funding. Printing money, as it turns out, is a profitable business, so the Fed pays its operating expenses — buildings, salaries, and so on — out of those earnings, and then refunds whatever is left over to Congress. So the Fed helps fund Congress, not the other way around.

This is correct.

The article praises the FED’s independence from all political control. All textbooks do. All mainstream media articles do. This is assumed.

The reason for that insulation is that the job the Fed has to do is complex (do you really want to trust Congress to decide how to calculate capital levels for giant banks?) and benefits from being separate from politics. A president typically has every incentive to encourage low interest rates in the run-up to an election, for instance, even though it could come at the cost of unpleasant and self-defeating inflation over the long run. Independence cuts both ways, though! In recent years, the Bernanke Fed has shown a willingness to move toward easier monetary policy, even over the objections of many congressional Republicans.

No Establishment author comes out and says this: “The Federal Reserve System possesses complete federal sovereignty, yet is beyond the power of any branch of government. It is legally more independent than the CIA. This is a great thing. Democracy has its limits, and should not be defended as a universally legitimate system of government.” This is in fact what the entire American Establishment believes, but never, ever says in public. The Establishment says “independent, ” not “anti-democratic.” They figure that the rubes — voters — will not catch on. They assume correctly.

This is Bernanke’s FED, and has been from the beginning.

In theory, the chairman holds one of 12 votes to decide what those decisions ought to be. But in practice, he or she has much more influence than that would suggest. The chair sets the agenda — which issues in the economy are worthy of discussion and consideration and which aren’t. The chair oversees the staff members who prepare the forecasts on which the decisions are based. The chair determines who talks and when and for how long. As a matter of tradition, committee members don’t dissent unless they strongly disagree with the direction the rest of the committee is heading. Through the nearly eight years of the Bernanke chairmanship there have never been more than three dissenters at one meeting.

Given the fact that this article appeared in the second most influential U.S. newspaper, one that is located inside the Washington Beltway, and is basically introductory, we get some indication of how few people know what the FED is, even in Washington, D.C. This is another reason for its enormous power . . . and has been ever since it opened its doors in 1914.

Continue Reading on www.washingtonpost.com

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10 thoughts on “Washington Post Article Identifies FED Chairman as #2 in Power

  1. The biggest single gap in the education of the American public is in economics. It is a crying shame that a subject that so effects their lives is such unknown territory to most. Surprisingly, what I write in my blog about economics are the most read postings there. Everyone should read this article on the Fed. Excellent! See my blog at http://cranky-conservative.blogspot.com

  2. Another reason why private central banking — that always produces more debt than prosperity with which to pay the debt off — is a lousy way to run an economy.

  3. What a deceptive article. And what a deceptive comment and opinion by Gary North. Gary, apparently you are not aware of who the really most powerful person in the United States is. Let me explain it to you. I AM. And so are the some 300,000,000 people citizens of the various States which make up the USA. We have government by the consent of the governed. We-The-People (WTP) rule this country. But those 1984 people keep trying to keep this fact under wraps. The 1984 people keep publishing articles such as above in an attempt to keep us subservient to some falsehood. Stop writing that misleading stuff. When more people realize that WTP rule, things will change around here. Look what happened in Iceland: they arrested those bankers. They told them to take their claims of you-owe-us-money and stow it. The American people never agreed to fund the world. The FRS is hanging on by deception. Sometimes Obama gets his sayings partially correct: Yes they can – FAIL. Yes they can – GO TO JAIL. WTP are the champians. Start writing articles about that.

  4. "Anti 1984" — you are living in a fantasy and don't seem to know what power is. Power and liberty both concern ultimate decision making, where those exercising liberty are making decisions which primarily affect themselves, while those exercising power are making decisions which primarily impact other people. 'WTP' could have liberty but don't because the State has arrogated to itself a monopoly of force, of ultimate decision-making power, over 'WTP' and has gone largely unchallenged. The last time the State's power was really challenged was 1861, and was brutally suppressed. Let's deal with reality, not utopia. The Fed chair really is the second most powerful person in the United States because he really does make the most decisions which primarily impact other people, involuntarily I might add redundantly but for emphasis.

  5. Say what?????

  6. Power? Hahahaha! What is power? Power is only what we have decided to give them and what they decided to take. The only problem I see with this is there is usually no leftovers.

  7. “Power” is the willingness to use it.

    Full stop.

  8. Victor Barney says:

    "Anti," you're a "dreamer," we LOST that "dream"(RIGHT) of yours in 1913 under Wilson, seen through by FDR, & piled on by all the Democratic Marxists(Anti-Christ's) that followed, ALL EXCEPT JOHN KENNEDY believe it or not, who was a war veteran & against MARXISM, which exactly is WHY both he and his brother Robert were murdered by the way! The Castro stuff was all a smoke screen, although the "mob" also had to be involved, which also is a scary thought!

  9. Oh, gimme a break. We the people have NEVER run this country, or any country for more than a short time. You cannot separate money from power, thus every country in the world has always been run by the rich. The democratic trappings are just coverings.

    That's not to say that the people can't seize power briefly, but they never keep it.

  10. The real "leader of the world" is a conglomeration of all the worlds top industrial corporations. They sit at the head of the table and pay the bill. Political leaders are highly visible but, in truth, they are of little use – in fact, they probably do more harm to society than good. IMHO.