Thursday, December 13, 2012

The Fed is the Most Powerful Branch of the US Government

As we all know so well, we have 3 basic constitutional powers: legislative, executive, and judiciary.  Only 2 of them, legislative and executive (within limits), can affect the economy in very direct ways.

Regulations, national budget, taxes, incentives, subsidies, exemptions, and foreign policy are but a few of the ways the government affects us in very tangible ways.

The judiciary power cannot do too much about the economy as the courts are simple post facto arbiters.

The poor state of our economy is causing ripple effects in our lives, from employment opportunities, healthcare decisions, housing, and transportation to political choices and wealth distribution.

As of now, we cannot make decisions on next year's budget as we are not sure what the tax rates are going to be and we do not know that because 2 branches of our government have failed to perform their constitutional duties. It is bizarre that even though there are so many uncertain components in economic planning the ones we need to worry the most about elate to the government actions (or lack thereof).

The legislative and executive branches of our government have failed to perform their jobs and have been failing persistently over the past several years. The leaders of these government branches cannot agree whether they should say 'Hi' or 'Hello' when they meet and we pay the consequences. 

Under the massive clouds of uncertainty on the functioning of the legislative and executive branches, one branch of the government, not even sanctioned by the US Constitution, has emerged more powerful than ever.

That branch is the Federal Reserve System (The Fed). The Fed is the most powerful branch of the US government and without Fed's actions over the past 5 years the US would have literally sunk into an extraordinarily deep recession and, quite possibly, into a depression. Is this branch controlled by the people? No. Is it accountable to the people? Very indirectly and ineffectively.

The Fed has the full power and capability to create economic crises, to favor political specific parties over other parties, to massively influence credit availability and size (the blood of capitalism), and the ability to affect international trade via currency and exchange rates manipulation.

The Fed is a government within the government. It has control over the health of the banking system (legislative power), controls the monetary mass and credit (executive), and recommends sanctions when banks do not do what they are expected to do (judicial).

The actual processes the Fed uses to perform its actions are semi-occult and based on questionable science that imply that governments 'live forever' and, consequently, the money supply can be infinite under some specific conditions.

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