Government | Michael R Lewis, ASJA

August 18, 2013January 3, 2024

An Explanation of the Federal Reserve System – How It Affects You

The words of Saint Paul to Timothy in the Christian Bible have resonated throughout the ages: “For the love of money is the root of all evil.” Therefore, it should come as no surprise that the Federal Reserve System (otherwise known as the “Fed”), the mother of all money in the United States, has been publicly reviled since its formation in 1913.

Charles A. Lindbergh, Sr., father of the famed aviator, claimed that “This [legislation] establishes the most gigantic trust on Earth…the worst legislative crime of the ages is perpetrated by this banking and currency bill.” Henry Cabot Lodge, Sr. said the Federal Reserve Act “seems to me to open the way to a vast inflation of the currency,” a consequence abhorrent to anyone with significant wealth that would be devalued as a result.

At the same time, the inability of the country to reduce or eliminate the impact of wide gyrations in the economy – booms and busts – with accompanying financial panics and economic depressions persuaded most Americans that a change in the country’s banking system was necessary. While there was considerable disagreement about the solution, public officials – both Republicans and Democrats – agreed that the existing monetary system was inflexible and incapable of meeting the needs of a country destined to become the world’s greatest beneficiary and exemplar of free enterprise.

Big Government vs. Small Government

The term “big government” stimulates plenty of images and emotions, and they’re generally negative. Words like “bureaucratic,” “inefficient,” “intrusive,” and even “corrupt” are often associated with the term. Economists charge that big government interferes with the mechanisms of free enterprise. Libertarians believe it seeks to control private or personal freedoms guaranteed by the “natural law” eloquently philosophized by John Locke and formalized in the U.S. Constitution’s Bill of Rights. And politicians claim big government lacks checks and balances on its exercise of power, leading it to represent special interests to the detriment of its citizens.

Small government, on the other hand, is generally believed to lead to a more efficient and flexible system. “Getting government off our backs” or “getting government out of the way” are cries to return to the low-tax, no-regulation beliefs of the American Revolutionary period. The size of government envisioned by the country’s founders sought to cast off tyranny and empower small businessmen and entrepreneurs.

US Energy Independence by 2020?

United States presidents since Richard Nixon have sought the development and implementation of a comprehensive energy policy without success. As a consequence, the country became heavily dependent upon foreign oil imports in the early 1970s. The first supply crisis occurred with the Arab Oil Embargo of 1973-1974, which, in his “Memoirs,” Henry Kissinger called the “worst crisis to the free world since World War II.”

American needs for energy, particularly petroleum, dictate our foreign policy and relations with other countries around the world. The fact that we are beholden to Middle East regimes, often unpopular in their own country, requires that we maintain a military presence in the region to protect our interest in the oil resources. This, in turn, has drawn us into numerous expensive and deadly police actions. And our efforts to democratize the countries are unsuccessful – perhaps because our motives remain suspect by the people living there.

Furthermore, our cost for foreign oil, approximately $1 billion per day in January 2012, slows our economy and wreaks havoc with our balance of payments. In short, our practice of paying billions of dollars to import oil, particularly to those nations that have been hostile to U.S. interests, has become untenable.

Privatization of Public Services

Since the beginning of civilization, there has been tension over the role of government and the provision of services paid for with public funds (tax dollars). Before the advent of democracies, ambitious, enterprising men sought the favor of royalty in order to gain political power and riches at the expense of the population.
American governments, whether federal, state, or local, have not been immune from this trend where politicians manipulate the economy to fill their own pockets, as well as the purses of their friends. Boss Tweed and his cronies at Tammany Hall bilked New York City taxpayers of more than $200 million in the building of public works by private contractors. The Credit Mobilier of America scandal with Union Pacific during Ulysses S. Grant’s presidency reverberated for decades. According to The Atlantic, privatization leads to crony corruption, citing the example of Edward Snowden and Booz Allen Hamilton.
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