classical economics
for analysis,  forecasting
and policy design

Picking Fed Governors

PICKING FED GOVERNORS
One Criterion: No Keynesians!
By Wayne Jett © April 24, 2019

     President Donald Trump is authorized by federal law to appoint two additional members of the Board of Governors of the Federal Reserve, subject to confirmation by a majority of the Senate. The president recently named two candidates, Stephen Moore and Herman Cain, but subsequently withdrew the second of these at Mr. Cain’s request. Steve Moore is already experiencing headwinds because he does not toe the Keynesian ideological line as required to satisfy the economics Establishment.

Principles of Classical Economics

     To refresh a few basic points of classical economic theory that have been nearly lost during the past 100 years in America, the first principle of classical monetary policy is that the purchasing power or value of the money unit should be as stable as possible – neither gaining nor losing purchasing power over time. This is why gold is used as the measuring stick of money value, because its quality, nature and value is the most stable over time. This principle favors and encourages work, production and saving, while refraining from inducing booms or busts.

     Classical theory’s second monetary principle is that the intrinsic value of money should be in the possession of its owner, or as easily put into that state of affairs as possible. For example, in America before 1933, dollars were promptly convertible into gold at the guaranteed rate of $20.67 per ounce. Most importantly, this principle avoids the inevitable crash of fiat currency, which takes the value of productive labor in exchange for a paper promise, then leaves workers and producers destitute when that promise proves empty.

The 19th Century Democrat Party

     No popular constituency today understands and respects these economic principles as well as did the farmers, laborers and small businessmen of the 19th century Democratic Party. Yes, these people favored plentiful money in the economy, as exhibited by their support for using silver as well as gold in the money supply. But they were not so ignorant as to support use of fiat currency, as the Federal Reserve issues today. They recognized the significance of real value in your pocket when the week’s work is done, as contrasted with a paper promise to deliver someday a “dollar’s value” signed by a faceless, ruthless institution like the Fed.

     The longest economic “contraction” in U. S. history occurred during the 1870s, after Congress enacted a statute (as demanded by the global cabal which later established the Federal Reserve) requiring that the value of the dollar be increased back to the value which existed before the printing of fiat money “greenbacks” during the Civil War (1861-1865). The statute provided that the pre-war dollar value ($20.67/oz of gold) would become effective in 1879.
This statute-imposed deflation (increasing value of the dollar) produced bankruptcies throughout the decade into 1879 – prices had to be slashed in order to sell goods and services, and businesses failed as the result – even during the period of economic expansion which followed the devastating war between the states.

     Monetary deflation produces this harm, regardless of whether the deflation is produced by act of Congress or act of the Federal Reserve. The Tech Crash of 2000-2002 was produced by deflation secretly and intentionally caused by the Fed to benefit Wall Street’s short-selling investment banks and their satellite hedge funds.

Wilson’s Betrayals and the Ruling Cabal’s Triumphs

     Classical economic thinking determined U. S. presidential elections throughout the 19th Century and into the 20th. But the trust of those “honest money” Democrats in their party’s leadership was betrayed by the man they elected president in 1912, Woodrow Wilson. Formerly president of Princeton University, Wilson had promised in his presidential campaign to oppose establishment of a privately owned central bank and to oppose enactment of a federal tax on earned income. He broke both promises within his first year in office – 1913 – and America has been much the worse for it on both counts.

     Americans have never been informed of the most important financial affairs of the Federal Reserve. The Fed and its servants insist it must be “independent” and free of audit by outside interests incapable of understanding its sophisticated financial affairs. We have never known how many dollars the Fed has distributed “out the back door” to its owners and to the owners’ related financial institutions. No rules or principles of accounting are enforceable against the Fed.

     But we can detect enough information to know the Fed has been deceptive, mischievous and destructive in its handling of American monetary affairs and the financial environment. During the 1920s, however, the Fed largely walked the straight and narrow, avoiding either inflation or deflation. And, the Fed did not pull the laboring oar which imposed the Great Depression upon Americans and the world, as falsely confessed by Ben Bernanke while he served as Fed chairman. The tasks involved in imposing the Great Depression were handled first by President Herbert Hoover and much more actively by President Franklin D. Roosevelt.

FDR: Traitor To His Electorate

     Yes, the same FDR born and raised in New York elitism was not at all a “traitor to his class” as some academics and media still insist. In fact, as president FDR served very well the interests of the Rockefellers, the Morgans and, thus, the Rothschilds and others of the financial cabal behind establishment of the Fed.

     In doing so, FDR made certain the Great Depression was longer, deeper and more destructive of human lives than even the depression he inherited from Hoover. His methods and actions were taken largely outside and away from the Fed so as to avoid focusing attention or blame on the Fed. Nonetheless, the Fed pitched in to assist FDR’s approaches towards making the Great Depression as bad as possible.

     When first manned by FDR’s new appointees in August, 1936, the Fed’s board of governors increased the amounts of required bank reserves by 50% for no reason other than “to show who’s boss,” even though banks were not financially troubled at the time. That action caused many foreclosures of loans – even performing loans – and bank failures among small banks detested by the international banks of Wall Street.

     After Roosevelt won re-election in November, 1936, the Fed raised bank reserves another 33% in January, 1937. This was far worse than mischief. It was punitive destruction of small banks, small businesses, farmers and home owners for the benefit of Wall Street, its conglomerate clients and corporate farming.

     The Federal Reserve has been a principal tool of the global cabal’s plan, published in 1901 to the cabal’s supporters, to destroy completely the world’s “middle class” – all persons capable of supporting themselves and their families by their labor and production. That sordid goal has not been modified in any significant respect by Congress’ feigned attempts to guide, alter or direct Fed operations or policies.

     Never has this been better demonstrated than during the “financial terrorism” of 2008. Fed chair Ben Bernanke was led around like a goose on a leash by Treasury Secretary Henry Paulson, former CEO of Wall Street’s Goldman Sachs, to watch as Bush 43’s economic czar dismembered less powerful Wall Street banks (Bear Stearns and Lehman Brothers) and distributed their parts to the more dominant Wall Street predators.

     Guess which year in history was J. P. Morgan Chase’s best year ever. That would be 2008, during which Chase was permitted to purchase all of the shares of Bear Stearns for pennies on the dollar, with billions more from the Fed thrown in to sweeten the deal.

No More Keynesians Allowed!

     From its outset, governors of the Federal Reserve have been carefully chosen operatives of the ruling cabal who sponsored the Fed’s creation and who own it today. John Maynard Keynes became a cabal operative of a different nature by turning classical economics on its head – making simple concepts like jobs, wages and interest so complex that well-meaning people would fall silent in their efforts to affect policy.

     While Keynes still lived, he was called out for his veiled support of mercantilism by the world’s most respected authority on the topic – the Swedish economist Eli F. Heckscher, who had authored a two-volume work on mercantilism. Heckscher called attention to Keynes’ more favorable views of mercantilism than his own, and to the contradiction that Keynes professed much more benevolent intentions towards common people than mercantilists themselves ever had.

     The historical fact that Keynesian blather has been permitted to destroy the quality of economic analysis and policy in America is a permanent stain on reputations of academic institutions and political institutions alike. President Trump deserves support and accolades from Americans, including especially those professing economics as their field of work, for nominating any person to the Fed board of governors who expresses healthy skepticism towards premises, analysis and policies identified as Keynesian in their origin.

     President Trump's nominees to the Federal Reserve board should be persons best equipped and inclined to stop the Fed's abuse of the monetary system and to end the Fed itself in the way most beneficial and protective of the economic interests of the American people. For reasons stated, this leaves all Keynesian economists out.