The Fed’s Sole Purpose Is to Mislead the Public (Audio)

Tom Woods and Mark Thornton, Senior Fellow at the Mises Institute, discuss the Federal Reserve’s long history of being completely wrong about the state of the United States economy. He shared some choice quotes from Fed officials in which they claimed the economy was in great shape just before the 2008 crash. Instead of working to improve its forecasts, the Fed strives to have as many economists agree with its position as possible, giving it an air of authority. As Thornton put it:

Highlights from the interview:

“I went back to 2007 and looked at the speeches given by the Chairman of the Federal Reserve, the Vice Chairman of the Federal Reserve, and some of the leading members of the Board of Governors to see what they were saying about the economy – whether they were telling us that there was trouble ahead or they were telling us that things are all fine and good… Under the gold standard, they didn’t have to be transparent because the gold was transparent for us. When we went off the gold standard, the Fed went into a secrecy mode where they didn’t tell us anything about what they were doing or anything about what they planned to do…”

“The Fed is talking about consumer confidence, investor confidence, and and financial market confidence. But the reality is that this whole thing is a con game where they’re taking advantage of us, and they’re doing so with fancy words and misleading languages. So you have to understand that that’s what the Fed is about. They’re operating an economy, a monetary system, and a banking system where money is just pieces of paper and the banking system has, generally speaking, no reserves in the bank. You got a real flim-flam type of operation involving paper money, which isn’t worth anything really, and banks that don’t really have any deposits in them if all depositors were to try to get their monies simultaneously. They’re always trying to build confidence, and they use the language of the Federal Reserve to try to mislead people about what’s really going on…”

“[Regarding removal of the word ‘patient’] That’s the kind of situation we’re in right now, where one word can move a trillion dollars worth of value in the stock market. This transparency thing, which was considered to be so good for so long, now we’re at the end of our rope. They’ve been able to get away with this confidence game because people just don’t seem to be paying attention to what they do, what they say, what they’re all about…”

“Well in 2006… the most famous quote was when he [Ben Bernanke] was testifying, and then at a press conference afterwards he said that he had made an investigation into mortgage lending practices by banks and other lending institutions and his conclusion was that things were never better in the economy with regard to mortgage lending practices by US financial institutions…”

“Fred Mishkin is the acknowledged expert in money and banking… What Mishkin’s argument leads to is, ‘If you’re a consumer, don’t worry about buying a house, because everything’s going to be alright.’ And if he’s speaking to people in the finance industry, he’s telling them, ‘Don’t worry about the housing bubble, feel free to give out mortgages to people who have bad credit.’ He’s sending the absolute wrong message to a large number of critical people in the economy at precisely the wrong time. He’s giving them bad information that’s 180 degrees wrong at this time…”

“He [Donald Cohn, former Vice Chairman of the Board of Governors at the Fed] was playing up the Federal Reserve, as they all did, about its role in market places and it’s supervising these financial firms and that they’re in the position to deter financial crisis… He’s basically telling his audience that the Fed has lined up a multi-layered approach to prevent financial crises, to identify risk in financial firms, and to encourage management responses to risk, to try to spread risk, eliminate risk, and manage risk and to look out for black swan type results… He’s [talking about] the unstable nature of our money and banking system… the fact that we don’t have gold that’s stored as deposits in banks, but we have paper that’s not stored anywhere but simply lent out multiple times, and then we have the FDIC insuring those deposits so that nobody is concerned about the fact that we have a money and banking system that’s so inherently unstable. So he’s saying the Fed is really working that angle in making sure we’re definitely preventing future financial crises…”

“The Fed is a big player in the economics profession. It hires hundreds, if not thousands, of economists and it gives grants and research money to many, many other economists. They have a very powerful role in the economics profession. For example, Larry White has shown that 80 percent of the members of the editorial boards of the leading academic journals in money, banking, and macroeconomics either work for the Fed, have worked for the Fed, or have been a paid consultant to the Fed. So there’s a lot of dirty money that’s dominating modern, mainstream macroeconomics that comes from the Fed… We’re getting more and more revelations with regard to this.”

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