The Most Important Economics Video You'll Ever See
Summary
TLDRThis 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
🏛 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.
📉 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.
🏦 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.
🔄 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.
Mindmap
Keywords
💡Federal Reserve
💡Recession
💡Interest Rates
💡Monetary Policy
💡Federal Open Market Committee (FOMC)
💡Inflation
💡Unemployment
💡Economic Growth
💡Bankers
💡Wealth Holders
💡FedSpeak
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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