Federal Reserve: Good or Bad? #652

This is Part One of a two-part series. Be sure to watch the ENTIRE Program!

Segment 1: Quantitative Easing Now, Financial Pains Later

G. Edward Griffin states that Quantitative Easing is a tricky word that sounds good, but is another way of creating money out of nothing and stealing from the taxpayers through inflation. He insists that to solve our financial problems, we shouldn’t look for solutions by asking the people who created them. Minerd believes that the Federal Reserve is facing a series of unprecedented challenges as a result of taking on unprecedented policies at the central bank, and he sees a serious issue regarding the control of future balance sheet expansion to avoid a monetary policy blunder. Minerd states that the Republic wasn’t destroyed by inflation between the 1950s and 1980s, and is still here. He is concerned that there is a high risk of stagflation in the long run, but it won’t be a problem in this decade. Griffin describes bankers and politicians as being too like-minded and sees them as con artists.

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Segment 2: Economic Turmoil Ahead

B. Scott Minerd believes the Federal Reserve has a clear bias toward reducing unemployment and won’t tolerate a severe economic slowdown and predicts that for the near term, we’ll continue to see higher asset prices across the board. He warns that ultimately, the transition and end of Quantitative Easing will be a big challenge, and the longer we wait, it is more likely we will see a very profound and severe impact on the U.S. economy. Griffin fears that people don’t see the real crisis of potential society collapse, with martial law and totalitarianism. He states that people think they’ll be fine if they put enough money away, but no one will be fine because the money will be worthless. Minerd opines that the roadmap shows low-interest rates for a protracted period of time, but eventually the country will come to a crossroads where a decision needs to be made regarding price stability versus keeping the economy moving forward.

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Segment 3: Federal Reserve: Friend or Foe?

G. Edward Griffin explains that during the 1920s, the expansion of money supplies was not a steady advance but a series of convulsions, each cycle at a higher level than the previous one. He faults the process that didn’t allow the busts following the booms to play themselves out, and what he calls monetary scientists who were able to cancel out the downward adjustments. Griffin likened the process to prescribing increasing doses of narcotics to postpone the awareness of an advancing disease. Minerd points to two instances in the Federal Reserve’s history when the downside of economic activity was extremely painful – the Great Depression of the 1930s, and most recently, the financial crisis that is often referred to as the Great Recession. He gives the Federal Reserve credit for acting aggressively in stopping the decline of asset prices in the latter event by creating money. Griffin charges there is no argument that the system failed in its stated objectives, despite all of the changes in policy, personnel, and political parties. He states it’s not unreasonable to conclude that the painful answer is that the stated objectives were not the Federal Reserve’s true objectives.

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