Some time ago, I happened to listen to a radio show about dancing chickens – and the Fed. One of the hosts had picked up the story from the movie Pure Country, where one of the characters recounted how a guy at a carnival could make chickens dance.
Turns out, he had one hand on the stage and the other hand, out of view, on the burner that was heating up the stage. When the stage got so hot that the chickens couldn’t take the heat anymore, they’d start dancing. But they never jumped off the stage! So Dusty, the main character, grumbled, “Sometimes in life, I feel just like the dancing chickens.”
“Don’t be that dancing chicken,” host Ryan Litfin explains to those of his listeners who haven’t figured this out yet. When “things start heating up underneath you and start turning into a dire situation, get off that stage.”
The co-host chimes in. “The Fed is turning up the heat under the stage,” he says. “Bernanke is one of the lead igniters.” The Fed’s zero-interest-rate policy is affecting people’s retirement, which leaves people with three choices, he says: “Save more, work more, or tighten your belts.”
How did the Fed get to be this omnipotent power that can redistribute trillions of dollars as it sees fit, from working stiffs and savers to the financial elite? How could it make regular folks dance like chickens on a hot stage? On December 23, 1913, President Woodrow Wilson signed the Federal Reserve Act into law that created the Federal Reserve System. That’s how. And that glorious 100th anniversary is coming up. Thankfully, it will be buried in holiday frenzy and stress-out mayhem.
The actual event of creation occurred in November 1910, when Senator Nelson Aldrich, Assistant Secretary of the Treasury Piatt Andrew, and five top bankers – Frank Vanderlip, Henry Davison, Charles Norton, Benjamin Strong J. D. Rockefeller, and Paul Warburg – met under utmost secrecy at the otherwise empty Jekyll Island Club Hotel on Jekyll Island, Georgia. Only some servants were there to take care of them. Over the course of a week, they developed the draft legislation for the 1913 Federal Reserve Act that would establish the current Federal Reserve and grant it ownership of the US currency system.
In a stroke of Wall-Street brilliance, that structure, through its twelve regional Federal Reserve Banks, would be entirely owned by banks, such as Goldman Sachs, and by corporations with large financial operations, such as GE and, well, Enron. In 2001, for example, Enron CEO Jeffrey Skilling was Chairman Pro Tem of the Houston branch of the Dallas Fed (Dallas Fed Annual Report). Except he didn’t get bailed out. GE CEO Jeffrey Inmelt, a director of the New York Fed between January 2006 and March 2011, did get bailed out.
The euphemism for this bank and corporate ownership, in today’s parlance, by the magic of Wall Street word-twisting, is “independence.”
The meeting on Jekyll Island remained a secret for 40 years. It established a non-democratic, unaccountable, privately-owned institution, with unimaginable powers not subject to any checks and balances – banking pun accidental – and not subject to many of the laws, such as insider trading, that normal people are subject to and go to jail for, in a country that takes fierce pride in its messy and to outsiders often inexplicably convoluted democracy. Only the seven-member Board of Governors is a Federal agency. What the men created on Jekyll Island was an immensely successful plan on how to pull a bag over the head of the American people.
To commemorate the 100th anniversary of this auspicious event, the Fed returned to the Jekyll Island Club Hotel on November 5 and 6, 2010, including Chairman Ben Bernanke, the “lead igniter,” as Litfin called him, to pay homage to the great minds that had bamboozled Congress into passing the law and President Wilson into signing it.
They’d promised Congress that a powerful Fed would eliminate the business cycle, these natural ups and downs needed to cleanse the system. “This infinite time of prosperity is what their pitch was in 1913,” Litfin pointed out. Since then, the US economy went through the Great Depression, destructive bouts of inflation, steep recessions, majestic bubbles and their devastating implosions, including the bubble a few years ago that ended in the financial crisis. And now new bubbles. Since being in charge of the dollar, the Fed has willfully destroyed it, to where only a few cents remain of what a buck was worth in 1913.
Today, the Fed is the darling of our lawmakers who need the Fed’s easy money to fund the gargantuan deficits that serve corporate welfare queens and special interest groups on which they’ve become financially dependent. The Fed is also the darling of Wall Street, too-big-to-fail banks, the largest corporations anywhere, the mainstream media, Warren Buffett…. Numerous studies have detailed that the Fed’s shenanigans have shifted wealth around, including a study from Pew Research that showed that the mean net worth of the bottom 93% dropped 4% between 2009 and 2011 while the mean net worth of the top 7% rose 28%. And it’s the most extreme at the top 0.0001%.
So, when the co-hosts spent an entire show recently explaining to the average listener what the Fed was and how it operated, it took some gumption.
“They print money, and out of nowhere,” he said. “It’s money for nothing.” In the background, the eponymous song by Dire Straits. They explained to their astonished listeners that the Fed wasn’t part of the government but a privately owned structure that was “at the very heart of our economic problems.” It was “a system of money that was created by the bankers” and “operates for the benefit of the bankers.”
You don’t hear that often on CNBC. There, Warren Buffett, greatest beneficiary – via his financial and insurance empire – of the trillions the Fed has handed out since the financial crisis, shows up with his avuncular smile to praise the Fed. He is at the very tippy top of the 0.0001%. “Many people would go as far as saying that the Fed is the biggest Ponzi scheme in history,” Litfin said. “I mean you’re creating money out of nowhere.” But these scattered voices on talk radio and the internet don’t carry far, apparently.
“If the American people truly understood how the Fed really works, they’d be screaming for it to be abolished immediately,” he explained. And that’s how he commemorated the Fed’s 100th anniversary.