#federal reserve
How Unaccountable Institutions are Shaping Your Life
Three centers of power increasingly dominate our lives, but are less and less accountable: The Supreme Court, the Federal Reserve, and Big Tech.
The Supreme Court
Start with the high court. These nine unelected individuals – all appointed for life – are about to revolutionize America in ways the majority of Americans don’t want. This court is poised to overturn Roe v. Wade, the 1973 reproductive rights ruling; declare a century-old New York law against carrying firearms unconstitutional; and strip federal agencies such as the Environmental Protection Agency of the power to regulate private businesses. And much more.
Let me remind you that five of the current justices were put there by presidents who lost the popular vote in their first election. Only 40 percent of the public now approves of the Supreme Court’s performance, a new low. Yet because justices are appointed for life, its members are immune to checks and balances, no matter how unpopular their rulings may be.
The Federal Reserve
The Federal Reserve is almost as unaccountable as the high court.
Presidents appoint Fed chairs for 4-year terms, but tend to stick with them longer for fear of rattling Wall Street, which wants stability and fat profits. (Alan Greenspan, a Reagan appointee, lasted almost 20 years, surviving two Bushes and Bill Clinton). President Biden has just reappointed Jerome Powell, the current Fed chair, for example.
Because it sets interest rates and regulates finance, the Fed can either keep the economy going near full employment or put millions of people out of work. Powell has kept interest rates near zero —appropriate for an economy still suffering the ravages of the pandemic.
But he has also bailed out America’s biggest corporations by taking on their junk debt, which they then used to buy back their own stock to the benefit of their CEOs and major investors. And he’s allowed Wall Street to go back to risky betting—prompting Senator Elizabeth Warren to say this:
Warren: “Your record gives me grave concern. Over and over you have acted to make our banking system less safe, and that makes you a dangerous man to head up the fed.
Big Tech
Lastly, Amazon, Google, Apple, and Facebook all wield enormous power over our lives, and they too are unaccountable to the public good. They’re taking on roles that once belonged to the government, whether it’s blasting into space or running cybersecurity.
And their decisions about which demagogues are allowed to communicate with the public and what lies they’re allowed to spew have profound consequences for whether democracy or authoritarianism prevails.
Worst of all, they’re sowing hate and division. As Frances Haugen, a former data scientist at Facebook, revealed, Facebook’s algorithm is designed to choose content that will make users angry. Why? Anger generates the most engagement — and user engagement turns into ad dollars. (The same is likely true of the algorithms used by Google, Amazon, and Apple.)
And yet, decisions at these companies are accountable only to their shareholders, not the public.
Beware. Democracy depends on accountability. If abuses of power go unchallenged, those who wield power will continue to consolidate it. It’s a vicious cycle that erodes faith in democracy and breeds cynicism.
So how do we break the cycle and hold these power centers accountable?
- Rotate Supreme Court justices with appellate judges and add more justices to the Court.
- Demand transparency from the Fed, and have an open debate on who should run it instead of letting Wall Street effectively decide.
- And finally, treat Big Tech companies as public utilities and regulate them, or break them up.
I’ll be honest. It will take vast amounts of public pressure and intentional organizing to get these solutions enacted.
Our only option is to turn up the pressure and keep fighting for our democracy.
Friday’s jobs report from the Department of Labor was a warning sign about the US economy. It should cause widespread concern about the Fed’s plans to raise interest rates to control inflation. And it should cause policymakers to rethink ending government supports such as extended unemployment insurance and the child tax credit. These will soon be needed to keep millions of families afloat.
Employers added only 199,000 jobs in December. That’s the fewest new jobs added in any month last year. In November, employers added 249,000. The average for 2021 was 537,000 jobs per month. Note also that the December survey was done in mid-December, before the latest surge in the Omicron variant of Covid caused millions of people to stay home.
But the Fed is focused on the fact that average hourly wages climbed 4.7% over the year. Central bankers believe those wage increases have been pushing up prices. They also believe the US is nearing “full employment” – the maximum rate of employment possible without igniting even more inflation.
As a result, the Fed is about to prescribe the wrong medicine. It’s going to raise interest rates to slow the economy – even though millions of former workers have yet to return to the job market and even though job growth is slowing sharply. Higher interest rates will cause more job losses. Slowing the economy will make it harder for workers to get real wage increases. And it will put millions of Americans at risk.
The Fed has it backwards. Wage increases have not caused prices to rise. Price increases have caused real wages (what wages can actually purchase) to fall. Prices are increasing at the rate of 6.8% annually but wages are growing only between 3-4%.
The most important cause of inflation is corporate power to raise prices.
Yes, supply bottlenecks have caused the costs of some components and materials to rise. But large corporations have been using these rising costs to justify increasing their own prices when there’s no reason for them to do so.
Corporate profits are at a record high. If corporations faced tough competition, they would not pass those wage increases on to customers in the form of higher prices. They’d absorb them and cut their profits.
But they don’t have to do this because most industries are now oligopolies composed of a handful of major producers that coordinate price increases.
Yes, employers have felt compelled to raise nominal wages to keep and attract workers. But that’s only because employers cannot find and keep workers at the lower nominal wages they’d been offering. They would have no problem finding and retaining workers if they raised wages in real terms – that is, over the rate of inflation they themselves are creating.
Astonishingly, some lawmakers and economists continue to worry that the government is contributing to inflation by providing too much help to working people. A few, including some Democrats like Joe Manchin and Kyrsten Sinema, are unwilling to support Biden’s Build Back Better package because they fear additional government spending will fuel inflation.
Here again, the reality is exactly the opposite. The economy is in imminent danger of slowing, as the December job numbers (collected before the Omicron surge) reveal.
Many Americans will soon need additional help since they can no longer count on extra unemployment benefits, stimulus payments or additional child tax credits. This is hardly the time to put on the fiscal brakes.
Policymakers at the Fed and in Congress continue to disregard the elephant in the room: the power of large corporations to raise prices. As a result, they’re on the way to hurting the people who have been taking it on the chin for decades – average working people.
RR
For daily essays, drawings, and discussion, please join me at www.robertreich.substack.com.
Hillary is taking the ‘C’ because… Clinton?
I honestly don’t know.
Also the flag says ‘Climate change’ because… the Left wants climate change?
I guess there isn’t some go-to image/symbol/phrase to represent the Right’s nightmare scenario of the globalists taking over the economy in the name of protecting the environment. Maybe a snooty polar bear stepping on the ‘No step on snek’ flag, to represent how we Leftists care more about animals than liberty?
I just made myself chuckle with the phrase ‘snooty polar bear.’ I’m an idiot. Maybe he has a monocle and glass of champagne, his nose in the air. ‘Oh, bother. There’s a symbol of individualism and freedom in my sight. How gauche.’
Please ignore my silliness. I’ve had a trying week and I need some release.
The Fed has been manipulating our money for far too long and we deserve to see an audit of the Federal Reserve. Will Donald Trump keep his promise and support an audit?
Written by Ron Paul and Rand Paul for Rare:
As presidents and Congresses come and go, the addiction to busting the budget remains; its voraciousness fueled by the same enabler, the Federal Reserve.
While it took our nation more than 225 years to accumulate nearly $20 trillion in debt (and much, much more if you factor in unfunded liabilities), our central bank can put Americans on the hook for trillions without blinking by simply creating whatever funds it needs out of thin air. Its status as “the lender of last resort” signs a blank check for politicians to spend to their heart’s content without worrying about the immediate consequences.
When pressed to at least provide some measure of substantive transparency for its actions, the Fed tells the American people it’s none of their business.
We disagree.
Time and again, we have been asked to justify our desire to Audit the Fed. Time and again, we answer, how can we afford not to? …
Throughout its existence, the Fed’s manipulation of interest rates and expansion of the money supply have led to malinvestment and helped generate a devastating boom-and-bust cycle that routinely levels our economy as the market corrects course. …
Time is of the essence. The Federal Reserve cannot be allowed to continue denying full accountability to the hundreds of millions of people whose financial futures hinge on its actions.
We cannot wait until we find ourselves slipping underwater to ask the tough questions about what keeps putting us there.
With President Trump indicating his support for Audit the Fed, the window of opportunity has never been more open.
If we hope to ever rein in spending, change a failed status quo and avoid paralyzing downturns, we must not let it slip away.
This week, the House once again passed legislation to audit the Federal Reserve. Harry Reid won’t take it up in the Senate. Throwback to when he used to think it was important too.
