The Most Important Economics Video You'll Ever See

Summary

This video script delves into the Federal Reserve's role in inducing economic recessions, asserting that it's not natural forces but federal policies that drive them. It explains how the Fed's power to create and erase money influences interest rates and economic activity, using a 'carrot and stick' approach. The script critiques the Fed's secrecy and the outsized influence of private bankers on monetary policy, suggesting reforms for greater transparency and reduced private control over the economy.

Takeaways

• 🏛️ The Federal Reserve System is often misunderstood and its functions are not well-known to the general public.
• 💵 The Federal Reserve has the power to create and erase money, influencing economic growth and decline.
• 📉 Recessions are not natural but are induced by government policies, particularly by the Federal Reserve.
• 🎯 The Federal Reserve sets target interest rates, affecting all types of loans and economic activity.
• 🐁 The Federal Reserve operates a form of 'behavior modification' on the economy, similar to how a lab rat is rewarded or punished.
• 💼 The Federal Open Market Committee (FOMC), composed of 12 people, decides the monetary policy that impacts the global financial system.
• 🏦 Money is created when the New York Federal Reserve Bank buys treasury bonds from private banks, and erased when it sells them.
• 📉 Raising interest rates by the Federal Reserve can lead to economic decline and higher unemployment.
• 💼 The Federal Reserve is structured with a mix of public and private influence, with private banks having a significant role in its governance.
• 🔒 The Federal Reserve operates with a degree of secrecy, and its decisions are not widely discussed or debated in the public domain.
• 🌐 The Federal Reserve's policies can lead to economic ruin for many while benefiting a small group of wealthy bankers and investors.

Q & A

What does the Federal Reserve System do?

The Federal Reserve System creates money, sets target interest rates, and operates a vast program of behavior modification through economic incentives and disincentives.

How does the Federal Reserve create money?

The Federal Reserve creates money by buying treasury bonds and other securities from private banks, which increases the money supply in the economy.

What is the role of the Federal Open Market Committee (FOMC)?

The FOMC, consisting of 12 people, is responsible for making decisions that affect the country's monetary policy, including setting the federal funds rate.

How does the Federal Reserve influence interest rates?

The Federal Reserve influences interest rates by creating or erasing money through its open market operations, such as buying or selling treasury bonds.

What is the impact of the Federal Reserve's actions on the economy?

The Federal Reserve's actions can lead to economic growth or decline. By controlling the money supply and interest rates, it can stimulate or restrict economic activity.

Why does the Federal Reserve sometimes cause economic decline?

The Federal Reserve may cause economic decline to combat inflation by raising interest rates and decreasing the money supply, which can lead to higher unemployment.

Are recessions a natural occurrence or are they induced?

According to the script, recessions are not natural forces but are induced by the federal government, particularly through the actions of the Federal Reserve.

What is the relationship between the Federal Reserve and private banks?

The Federal Reserve interacts with private banks, especially the largest ones, to conduct its monetary policy operations, such as buying and selling treasury bonds.

Is the Federal Reserve a government institution or a private one?

The Federal Reserve is a unique hybrid institution. It is not part of the government, but its Reserve Banks are private corporations chartered under federal law.

Why is the Federal Reserve considered to have disproportionate influence by private interests?

The Federal Reserve's structure allows private banks to own shares and elect some of its board members, which gives them significant influence over monetary policy.

What are some proposed reforms to the Federal Reserve System mentioned in the script?

Some proposed reforms include removing Reserve Bank presidents from the FOMC and having them appointed by officials rather than elected by private bankers to reduce the influence of private interests.

Outlines

00:00

🏛 Understanding the Federal Reserve

The paragraph discusses the Federal Reserve's role in inducing recessions through government policy rather than natural business cycles. It highlights the Fed's power to create and erase money, which directly impacts economic activity. The Federal Reserve's ability to set target interest rates influences borrowing costs, affecting the entire economy. The narrative compares the Fed's actions to a behavioral modification program, where economic incentives and disincentives are used to control economic behavior. The Federal Open Market Committee (FOMC), a group of 12 individuals, is identified as the decision-making body that shapes the country's monetary policy, affecting global financial systems.

05:00

📉 The Impact of Monetary Policy

This section delves into how the Federal Reserve manipulates the money supply to control interest rates, thereby influencing economic growth or decline. It explains the process of money creation through the purchase of treasury bonds and the erasure of money when these bonds are sold. The paragraph also addresses the Fed's role in causing recessions and unemployment to combat inflation. Historical examples are provided, including induced recessions since 1961 and the Great Depression, to illustrate the Fed's approach to economic management. The narrative suggests that recessions are beneficial for banks and wealth holders as they lead to reduced inflation and increased value of financial assets.

10:01

🏦 The Federal Reserve: Public or Private?

The paragraph explores the Federal Reserve's structure and questions its status as a public or private institution. It explains that while the Fed is not officially part of the government, the Reserve Banks are privately owned corporations. These banks are owned by private banks that also elect most of the board of directors. The paragraph discusses the historical and constitutional issues with this structure, suggesting it gives bankers disproportionate influence over monetary policy. It also touches on the potential unconstitutionality of the current setup and the historical precedent of Congress reforming the Fed.

15:01

🔄 Reforming the Federal Reserve

The final paragraph advocates for reform within the Federal Reserve to reduce the influence of private bankers and increase transparency and accountability. It suggests specific changes such as removing Reserve Bank presidents from the FOMC and having them appointed by public officials instead of private banks. The paragraph emphasizes the need for public discourse and political pressure to enact these reforms. It concludes with a call to action for viewers to engage in discussions about the Fed and consider alternative monetary policies that could be less harmful to the general public.

Keywords

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. It plays a critical role in the country's economy by controlling monetary policy. In the video, the Fed is described as having the power to create or erase money, which directly impacts economic growth or decline. The script discusses how the Fed's actions can induce recessions and affect unemployment rates.

💡Recession

A recession is a period of negative economic growth that lasts more than a few months. It is characterized by a decline in economic activity, often resulting in high unemployment rates. The video script suggests that recessions are not natural occurrences but are induced by the federal government, particularly through the actions of the Federal Reserve.

💡Interest Rates

Interest rates are the cost of borrowing money. The Federal Reserve has the power to set target interest rates, which influences the overall economy. When the Fed lowers interest rates, borrowing money becomes cheaper, stimulating economic activity. Conversely, raising interest rates makes borrowing more expensive, which can slow down the economy. The video emphasizes how the Fed uses interest rates as a tool to control inflation.

💡Monetary Policy

Monetary policy refers to the actions taken by a central bank, like the Federal Reserve, to control the supply of money and interest rates. The goal is to maintain a stable economy by managing inflation and promoting growth. The video discusses how the Federal Reserve's monetary policy decisions can have far-reaching effects on the global financial system.

💡Federal Open Market Committee (FOMC)

The FOMC is the decision-making body within the Federal Reserve that determines the direction of monetary policy. It is composed of 12 members who set the target interest rates. The video highlights the FOMC's significant power, as their decisions directly affect the economy and the lives of millions of people.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks like the Fed aim to keep inflation under control to maintain economic stability. The video discusses how the Fed combats inflation by raising interest rates and reducing the money supply, which can lead to economic decline.

💡Unemployment

Unemployment refers to the number of people who are without jobs and actively seeking work. The video script suggests that the Federal Reserve's policies can lead to higher unemployment rates as a byproduct of their efforts to control inflation. This is particularly relevant when discussing the trade-offs the Fed makes between fighting inflation and maintaining full employment.

💡Economic Growth

Economic growth is the increase in the production of goods and services in an economy over a period of time. The video script discusses how the Federal Reserve can stimulate economic growth by creating money and lowering interest rates, which encourages borrowing and spending. However, it also points out that the Fed can induce recessions to control inflation, which can halt or reverse growth.

💡Bankers

Bankers are individuals who work in the banking industry, often in roles that involve managing financial assets and making decisions about lending and investments. The video argues that bankers have a disproportionate influence on the Federal Reserve's decisions, which can benefit them at the expense of the broader economy.

💡Wealth Holders

Wealth holders are individuals or entities that possess a significant amount of financial wealth, such as investors and bondholders. The video suggests that the Federal Reserve's policies can disproportionately benefit wealth holders by maintaining low inflation rates, which can increase the value of their assets.

💡FedSpeak

FedSpeak refers to the technical language used by members of the Federal Reserve to communicate about monetary policy. The video script mentions that FedSpeak can be convoluted and obscure, making it difficult for the public to understand the Fed's actions and intentions. This lack of transparency is criticized as it limits public discourse and debate about the Fed's role in the economy.

Highlights

The Federal Reserve System is misunderstood and its operations are not as well-known as other institutions like the CIA.

The Federal Reserve has the power to create and erase money, influencing economic booms and declines.

The Federal Reserve sets target interest rates, affecting the cost of borrowing money.

The Federal Reserve uses a reward and punishment system similar to behavior modification to control the economy.

The Federal Open Market Committee (FOMC), a group of 12 people, decides the country's monetary policy.

The FOMC's decisions on interest rates have immediate effects on all types of loans.

Money is created when the New York Federal Reserve Bank buys treasury bonds from private banks.

Money is erased from the economy when the New York Fed sells treasury bonds.

The Federal Reserve's actions can lead to economic decline and unemployment.

The Federal Reserve has induced at least eight recessions since 1961.

Recessions are sometimes intentionally caused to combat inflation and are profitable for banks.

The Federal Reserve is a private institution with 12 banks owned by private banks in their districts.

The Federal Reserve's structure may be unconstitutional as Reserve Bank presidents are not appointed in the manner required by the U.S. Constitution.

The Federal Reserve's secrecy and the use of complex language, known as 'Fedspeak', limit public understanding and debate.

There have been calls for reforming the Federal Reserve to reduce the influence of private banks on monetary policy.

It is suggested that Reserve Bank presidents should be removed from the FOMC to increase transparency and democracy.

The video aims to start a public discourse on Federal Reserve reform and the potential for a more democratic monetary policy.

Transcripts

foreign

the awkward little secret of the

American system was that modern

recessions did not flow from mysterious

natural forces in the business cycle

recessions were induced by the federal

government

by the end of this video you will

undoubtedly have a better understanding

of how the Federal Reserve works not

only that this may be one of the most

important economics videos you'll ever

see the Federal Reserve System is the

least understood of all of our

institutions I would care to wager that

people understand more about the CIA

than they do about the Fed

so what does the Federal Reserve do well

it creates money

yes the Federal Reserve creates money

in William grider's massive history of

the Federal Reserve called secrets of

the temple he underlines the wizardly

powers that the Federal Reserve wields

or their mysterious powers of money

creation inherited from Priestly

forebears

with this enormous power the FED has the

ability to create a booming economy and

also a declining one the lord giveth and

the lord taketh away as easily as they

create money they can also erase it this

serves another important function of the

Federal Reserve to set Target interest

rates

put simply when the FED prints lots of

money the price to borrow that money

goes down and when the FED erases money

the price to borrow that money goes up

put in another way maybe in the

perspective of a psychologist the

Federal Reserve operates a vast program

in behavior modification

take the example of a Lab Rat and yes

you are the lab rat a lab rat put into a

maze observed by scientists will be

given rewards and punishments for

completing or failing to complete tasks

go the wrong way in the Maze you get

zapped with an electric shock go the

right way you get a little sugar cube

crudely put the Federal Reserve operates

on the same punishment and reward system

if the economy is flush with cash people

take out loans spend their money money

circulates increasing economic activity

but then the price of goods begin to

rise it's just a simple fact of life and

all good things have to come to an end

for the grave crime of economic growth

the Federal Reserve is the one who will

strike you hard with a swift backhand

they promptly raise interest rates

punishing the economy and erasing money

now what does it mean to create and

erase money things will get a little

technical here but in no way is it hard

to understand

now people like to say that the FED sets

interest rates but what they really do

is set a Target which is decided by the

Federal Open Market Committee or fomc

this group of 12 people are the authors

of the country's monetary policy full

stop

this small group of people is

responsible for making decisions that

affect every man woman and child in the

Global Financial system

the interest rate that the FED sets

called the federal funds rate affects

all interest rates your credit card

Mortgage Bank Loan student loans all

change immediately after the Federal

Open Market committee's announcements

following their Eight Annual meetings

this makes the fomc arguably the most

powerful group of people in the world in

terms of their economic impact on the

lives of all people

so they've set a Target interest rate

now what well the FED then creates money

this is done in what author Christopher

Leonard called a surprisingly small room

located in the New York Federal Reserve

building

maybe once or twice a week a Fed Trader

will enter the room close the door

behind them and sit at a computer

terminal to access the fed's proprietary

trading software called fed trade the

trader will begin buying treasury bonds

government debt from private Bankers do

they buy the treasury bonds from the

treasury Department no they buy the

treasury bonds from the Goldman Sachs

you must be me no only about 24 banks

are qualified to deal directly with the

fed the biggest banks the J.P Morgan's

the Goldman Sachs the citigroups when

the FED Trader buys the bonds from the

bank the money is deposited into their

account and with a few keystrokes money

has just been created out of thin air

just to review the Federal Reserve

creates money when the New York Federal

Reserve Bank buys treasury bonds and

other Securities from private banks that

money is then loaned to businesses to

fund production and hire workers that is

how money is made in the private economy

this money is erased when the New York

fed does the opposite by selling

treasury bonds when the bond is sold the

bank gives the money back the money is

now gone Poof from the private economy

the second way that money is made is

through What's called the discount

window at the 12 different federal

reserve banks around the country

basically these fed banks will loan

money to local banks in their area using

money that the FED has created that

money is erased when the private Banks

pay back the loan poof that money is now

gone so when the Federal Open Market

Committee sets a Target like they want

to lower the interest rate by half a

percent they start pumping the economy

with money they do this by buying bonds

from Banks or loaning the money when

they want to raise the interest rate

which is what they're doing now they

sell off their bonds scooping money out

of bank accounts banks have less money

so they loan less money the scarcity of

money raises interest rates

to combat inflation the FED will raise

interest rates and decrease the amount

of money in the economy

this is another way of saying the

Federal Reserve causes economic decline

more specifically the Federal Reserve

causes unemployment

when you're trying to wring out

inflation you have to keep the economy

below its potential the nasty way of

putting that is you have to keep

unemployment high no slowdown no

recession that is what the FED is there

for this is a Lie the Federal Reserve

doesn't prevent recessions it purposely

causes them Piper Sandler the investment

banking firm produced a report in 2022

Which documents at least eight fed

induced recessions since 1961.

interestingly enough the Federal Reserve

bankers and economists used to be a

little more open and honest about this

before the massive recession beginning

in 1981 the fomc discussed cutting the

supply of money to the economy Federal

Reserve Governor Philip Caldwell didn't

mince words there wasn't any question

that the board knew that recession would

follow that's the penalty you have to

pay for going out too far on the

inflation side

the first recession induced by the Fed

was in 1920 following the first world

war the U.S borrowed heavily causing

massive double-digit inflation so the

Fed ramped Up interest rates so high the

recession that followed was bad enough

to be labeled a depression unemployment

exploded

it was an especially long recession at

that and a year later Federal Reserve

Governor Adolf Miller said it was still

too early to ease the recession because

unemployment was still too low even

though it was at nearly 12 percent

according to Miller what needed to

happen was the liquidation of Labor and

the same went for the Great Depression

treasury secretary Andrew Mellon would

tell President Hoover that the way out

of the Depression was to make it worse

he's reported to have instructed Hoover

to liquidate labor liquidate stocks

liquidate the farmers liquidate real

estate it will Purge the rottenness out

of the system people will work harder

live a more moral life the uncomfortable

truth is that recession and especially

the unemployment it causes is good for

inflation when people are laid off

there's less production with an excess

of goods now sitting around and less

money in people's hands to buy them

demand goes down and prices along with

it recession is also very profitable for

banks and other holders of cash and

financial wealth because inflation is

halted or brought down to very low

levels Banks love their appreciating

dollars and dollar denominated assets

the rich indeed get richer but for those

on the other end Relentless

anti-inflationary policies means the

loss of livelihoods homes and businesses

higher than normal inflation puts

pressure on all of us as is shown in

polling data the sharp rise in prices in

gas and groceries is a huge cause of

economic anxiety and in that regard

combating inflation can have a positive

effect but sometimes the Federal Reserve

goes too far and that is precisely the

problem with the FED being so shrouded

in secrecy

fomc announcements are seldom reported

in a broad way we don't see Jerome

Powell pop up on our timelines all that

much

in that regard the mass media and the

educational system cooperate in a

campaign of essentially censorship the

FED itself is guilty of obscuring its

deeds and intentions it doesn't help

that they use such convoluted technical

language which has earned its own

nickname called fedspeak as a result

monetary policy is not a subject for our

general discussion not a part of our

political debate this lack of debate

enhances the influence of the small

minority who do understand the subject

very well the community of investors

bankers and wealth holders

to understand how Bankers have become

the preeminent force in shaping our

financial lives we'll have to look at

the federal reserve's current

distribution of power

so is it true is the Federal Reserve a

private institution so the Federal

Reserve is not part of the government

after the Federal Reserve Act was signed

into law in 1913 12 banks in total would

be opened throughout the country what

are called The Reserve Banks legally

speaking the reserve banks are private

corporations chartered under federal law

each Reserve Bank is owned by the

private banks in its District private

Banks such as Wells Fargo or Bank of

America own stock in The Reserve Bank

and even earn dividends the stockholders

meaning the private Bankers elect

two-thirds of the board of directors of

each Reserve Bank and the board of

directors is who elects the head of the

Reserve Bank called the president

after 2008 Congress whittled down how

many of the private Bankers can vote for

the president so now it's more like half

and half a sizable influence nonetheless

funny sidebar here in 1939 Congressman

Wright Patman probably the most

notorious fed basher in history

complained that the FED shouldn't be

tax-exempt but subject to local property

taxes because it was a private

Enterprise the District of Columbia tax

collector actually sent a bill for

property taxes to the Federal Reserve

when the FED didn't pay the city of DC

tried to schedule a public auction for

the FED building it didn't happen

obviously but can you imagine Peter

Conte Brown in his book The Power and

Independence of the Federal Reserve

makes a compelling argument that as it

stands the current structure of the

reserve banks is unconstitutional he

does this by invoking Article 2 Section

2 Clause 2 of the U.S Constitution which

requires officers of the United States

to be appointed by the president and

approved by the Senate the seven members

of the Board of Governors are appointed

by the U.S president but the Reserve

Bank presidents are not even though they

are effectively equals they share equal

voting power in the Federal Open Market

Committee the governors have a slim

majority of seven to five but that isn't

the case in times where Governor chairs

have been vacant

this is where things get kind of insane

the majority of the governors on the

fomc has declined significantly starting

with the Carter presidency things all

but fell apart under Barack Obama on

three different occasions the Board of

Governors had three vacancies giving the

Reserve Bank presidents a majority on

the fomc from 2009 to 2015 the Board of

Governors had a majority only 42 percent

of the time

and The Reserve Bank president's votes

on the fomc aren't the only issue all 12

Reserve Bank presidents are present at

every fomc meeting and are allowed to

give their input completely unrestricted

compared to just seven Governors the

vast majority of voices in the room are

unelected officials selected in part by

private Bankers oh and also even though

there was a vice chairman of the board

who is one of the governors it is the

president of the New York Federal

Reserve Bank who is second in command at

the fomc meetings if anything the

governors are the ones that answer to

the New York fed president put in

another way an unelected official sits

second in command to the chairman on

matters affecting every person who

participates in the global economy

I think the evidence is pretty

overwhelming that private interests

namely Bankers have a dramatically

disproportionate influence on monetary

policy and The Reserve Bank system is

what allows private interests to

literally have a seat at the table for

discussion

are the aggressive anti-inflationary

policies starting to make a little more

sense it's almost as if they benefit a

small community of wealthy Bankers

Executives investors and bondholders and

the decisions that are made on their

behalf are outside the realm of

accountability that should exist in a

supposedly Democratic Society in fact

it's exactly undemocratic the

institution most deeply involved with

our lives is the one that is the most

secretive and least understood

so it can be done

well if you're Ron Paul you'd say End

the Fed or lots of people say that for

that matter not only is this extremely

unlikely it's also stupid there's never

a coherent argument as to what to

replace it with but what would you

replace it with how would the currency

who would how would the currency run

what would you replace it things always

bother me you know when someone removes

the cancer what do you replace it with

what a return to the gold standard which

would make money scarcity way worse than

it is now or maybe a return to the

so-called Free banking era of the 19th

century where Banks issued their own

currency you had probably 8 000

different types of paper money to choose

from it was lunacy hopefully throughout

this video I've shown why Banks should

have less power over money policy than

they already have not more the solution

lies which may be uninspiring and

depressing to many of you in Congress

as legendary fed chairman Paul volcker

said the Congress created us and the

Congress can uncreate us

Congress holds the power to reform the

fed and has done so before

the 1935 Banking Act took the treasury

secretary off of the Board of Governors

and created the fomc a dramatic shake-up

in the governing structure of the fed

this should undoubtedly be done once

again with pressure from the electorate

meaning you I hope the least that this

video can accomplish is galvanizing you

to begin the public discourse the

conversation regarding fed reform

for starters as suggested by Peter Conte

Brown The Reserve Bank presidents should

be wholly removed from the Federal Open

Market Committee that much should be

obvious it is unconstitutional that they

are there and their bias in favor of

banks is grossly unethical the

presidents of the Federal Reserve Banks

should not be elected by Boards of

directors at their respective Banks but

chosen by appointed officials

constitutionally if not by the U.S

president then at the very least the

Board of Governors in Washington again

this much should be obvious this would

take power away from the reserve banks

and in turn private interests who have

wholly too much influence on monetary

policy as it stands

this sentence should stick with you so

that you can think on it process it and

hopefully discuss it with others and

begin a dialogue at least at some scale

remove the Reserve Bank presidents from

the Federal Open Market Committee

it's not ending the FED not even making

the FED a department of the treasury a

less likely but definitely attractive

option no but it is something a first

step that can conceivably be achieved in

our lifetimes with enough political

pressure and mobilization it may still

seem impossible but as it stands the

intention of these private interests is

economic ruin for their own benefit no

matter the cost to everyone else

to tighten the choke chain on the

economy as is happening now often has

dire consequences

will there be a recession this year well

according to the Wall Street Journal

more than two-thirds of economists at 23

financial institutions including TD

Barclays Bank of America expect a

recession this year

of those that disagreed the most

optimistic of the bunch was Goldman

Sachs which sees just a one percent

increase in GDP

maybe if we all talked about the

machinations of our monetary policy and

the Federal Reserve System and made it a

subject of open and free debate as a

Democratic Society should maybe we could

come up with another way

one that doesn't mean millions of people

out of a job thrown out of their houses

and made destitute to the point of

despair

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