Scholars ask

By Michael Victory



Ask questions, it's the scholarly thing to do.

What is Federal Reserve policy? Is our central banking system working?

Are you information literate? To be information literate, a person must be able to recognize when information is desirable and have the ability to locate, evaluate, and use effectively the desirable information. Information literate scholars are truth seekers, who never stop asking questions. Information prepackaging in schools and through broadcast and print news media, in fact, encourages people to accept the opinions of others without much thought. Information literate citizens are able to spot and expose chicanery, disinformation and lies (ALA, 1989).

In 1977 The Federal Reserve Act proscribed two goals for United States Federal Reserve Monetary policy:


• Promote "maximum" sustainable output and employment

  
  
• Promote "stable" prices
  
  

When Business in the United States underwent a mild contraction ...the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. The "Fed" succeeded; but it nearly destroyed the economies of the world, in the process. The excess credit, which the Fed pumped into the economy spilled over into the stock market — triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in breaking the boom. But it was too late: ...the speculative imbalances had become so overwhelming the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed (Greenspan & Rand, 1987).

The above quotation is not a forecast of what might happen, but a summary of something that did happen. It was written more than 40 years ago in reference to 1920's America. The writer was a young economist named Alan Greenspan.

The former Fed chairman's words apply to current conditions as they did to the Roaring Twenties, but with a major difference. The difference is that as Fed chairman between 1987 and 2006, Greenspan acted even more irresponsibly than the officials he was criticizing. Rather than "sopping up the excess reserves," Greenspan added even more, morphing a stock market bubble into a housing bubble and consumer spending bubble of unprecedented proportions (Schiff, 2009).

Bureaucrats and mainstream media marionettes would have us believe the United States economy is beginning to recover. Rational economics implies that before it can recover, our economy needs to find a natural bottom, which continuing government stimulus has not yet it allowed it to do.

How well do you understand the United States banking system?


Has the Federal Reserve been successful?

Be a scholar.
Stay informed.
Ask questions.

~Michael Victory & David Freedom

American Library Association. (1989, January 10). Residential committee on information literacy: Final report. Retrieved April 15, 2010, from http://news.ala.org/ala/mgrps/divs/acrl/publications/whitepapers/presidential.cfm
Greenspan, A., & Rand, A. (1987). Capitalism the Unknown Ideal. New York, New York: Penguin.
Schiff, P. D. (2009). Crash Proof 2.0. Hoboken, New Jersey: John Wiley & Sons, Inc.

© Michael Victory