Federal Reserve oversight--or not

This is stunning. Since September of last year, the Federal Reserve ought to have lots of explaining to do. We're talking about trillions of dollars, unaccounted for. Fortunately, we have officials responsible for overseeing the Federal Reserve to make sure nothing gets out of hand.

Or do we? In this video, we see Representative Alan Grayson (finally, someone!) asking some direct questions about what's happening at the Federal Reserve. (You may know the Federal Reserve as the bank that prints the money, so you don't have to. It's called inflation, and I believe we're about to be hit with a tidal wave of decreasing value of every Federal Reserve Note held by anyone in the world.)

So--what's happening at the Federal Reserve? Apparently the Inspector General for the Federal Reserve doesn't know either. Nice. As Rep. Grayson mentioned, the sums in question amount to ~$30,000 for every person in this country. It seems the Fed "printed" these vast sums of money, handed them out to anonymous recipients, and has no real accounting for where this money went or who received it. It also seems the Inspector General has no idea either.

If we at least had an elected post available at this state-mandated currency factory, that would help. Perhaps we may have a slim shot at some occasional accountability. Or maybe if we at least had some other, viable form of legal tender, that would allow all who see fit to simply abandon use of the Federal Reserve Note for something that has hopes of maintaining its value. Unfortunately, we have no such things. Making purchases with gold or silver or bottle caps or Cabbage Patch Dolls is seen as use of a competing private currency, and is simply not allowed. Why not? What's the big deal?

The big deal is the government's refusal to maintain total control over the value of every citizen's work. To avoid being hemmed in by pesky budgets--spending within its means (through tax collection)--our lawmakers have discovered the allure of debt. Don't have enough in the budget for that pork? Who cares? We'll charge it! That's right--our lawmakers can spend infinite amounts of money to get what they want now and YOU'LL pay for it! How? The Federal Reserve will create new money (out of nothing, backed by nothing) to pay the debts incurred by the spenders in Washington. But wait, doesn't that cost somebody somewhere? Yes it does.

There is a finite amount of Federal Reserve Notes in circulation throughout the world (though some days it may not seem like it), representing a finite value. Suppose I hold $1,000,000 of those notes. I have a fraction of that total value. When the Federal Reserve cranks up their printing presses (they need not literally print the notes anymore), they do not create more value as represented by those finite Federal Reserve Notes in the world. In fact, they create more dollars, but the value remains the same. What does this mean? It means the $1,000,000 I hold now have less value than they did before the printing surge.

We can see this with a simple lemonade stand. Suppose I sell some great fresh-squeezed lemonade on the corner. I have a giant pitcher of perfectly-flavored lemonade, and it's selling great. But I've run out of lemons and sugar. Oops. I don't want to shut down my stand, and I've got some worthless water, so I decide to add water to my depleted pitcher of lemonade. Mmmm. I continue to sell lemonade, adding water when necessary. After a while, I notice my customers don't have any more nice compliments. In fact, many demand their money back, since this lemonade resembles dirty water more than lemonade.

Which would you prefer--the first or the last glass of that lemonade? The first obviously contains the best value. This is exactly what the Federal Reserve is doing to the value of the dollar. They add more and more "water" to the fixed value of the pitcher of lemonade, diluting the worth of each glass (eventually) to zero. And that's what we can expect to happen to our dollar at this current rate.

But there's not much use in complaining. You don't vote for king. And you don't vote for any of the posts held at the Federal Reserve.

Hey, it's only your livelihood.