I just got done reading a fascinating article found on the Huffington Post. This is some indepth information on the Federal Reserve bank and the extent of their control and influence on the economics profession.
After you get done reading this article (or reading my highlights, either or), remember this is the same Fed which Obama granted increased powers. To me this 20+ trillion dollar bail-out is the only issue that really matters. Nothing else even remotely comes close. That dollar amount is so large it could pay for everyone’s medical bills for nearly 10 years.
We’re already getting ripped raw, spending twice as much as other developed countries. But even so, even spending so much money, the bail-out could’ve paid for everyone’s healthcare bills for 10 years! We spent $2.4 trillion in healthcare in 2008. And if we got costs under control, it could fund healthcare for 20 years!
This healthcare debate is important, but pales in comparison to the bail-outs.
And the Fed’s expansionary policies, which create inflation, are also driving up college education costs, which to me is the other issue of paramount importance. Education is everything. Everything. But costs keep rising, and the kids are buried in deeper and deeper debts when getting out. Since 1982 the price of a college education has increased 482 percent, whereas wages have only increased 147 percent. The New York Times reports that within 25 years, if current trends continue like they are now, nobody will be able to afford a college education.
You can read about that here:
And this real estate bubble makes me angry. Home prices are inflated far beyond what they should be. While current homeowners may like it, it’s a corrupt system. Those who suffer the most are the next generation, like those just starting a family and buying their first homes. What happens to all the new college graduates, recently married and wanting to start a family of their own? Homes keep going up faster than wages. Check out this chart below. This shows the Fed’s policies, and how they’ve been pumping up home prices through their loose credit policies.
Just look at that! That line goes straight up. I love how this chart calls home values shooting off the chart a “CURRENT BOOM”. It’s certainly not a “boom” in terms sound economic growth. More like a giant firework display. A big boom, a giant fizzle, then an economic depression.
In a good economy prices go down, not up. Technological innovation brings about better ways to do the same things, and everything gets cheaper. But debt financed booms follow cycles like these. When prices of things which are important to everyday life are increasing in cost, that is always a bad thing.
And the people in power know this, but they have to be clever to sell it to the public. Here’s how they do it. The news networks don’t say, “Costs of homes are rising faster than your wages. Your children won’t be able to afford a new home, or live the quality of life you’re current experiencing.” Instead, they appeal to base greed. They say, “Home values are increasing. Buy yourself a new home now! This is a great investment opportunity!”
Don’t mind the mechanism behind WHY “home values” are increasing. Why some home, for no reason at all, would just continue to increase in value, just because it exists. Don’t ask that question. Don’t look behind the curtain. Just spend your new found equity in the shopping malls and borrow more credit! That’s how they sell these economic policies.
And we’ve spent nearly a trillion dollars on the Iraq and Afghanistan wars since their beginnings. I think the current total is somewhere in the neighborhood of $900 billion. You know how much money that is?
Let’s put that in perspective. 56 percent of students enrolled in four-year university programs spend less than $9000 per year in tuition and fees. 38% spend less than this, with their costs ranging in the $3000 to $6000 range. That’s an entire year’s college tuition and fees. The vast majority of students fall in this category.
So let’s take the high estimate and use a $9000 tuition fee per year for everyone. How many “student years” of college could $900 billion pay for.
$900,000,000,000 / $9000 = 100,000,000
I could send 100,000,000 students to college for a year. Fully paid.
And how many students are currently enrolled in universities all across this great nation? According to Wikipedia, the Department of Education says there’s currently 17.5 million enrolled in post secondary education (another name for college).
If you take 100,000,000 student years and divide that by the number of students in college, we get 5.7 years. Assuming my tuition and fee estimates are high, basically the same money we’ve been spending on these wars could have paid most, if not all of everyone’s college education costs throughout the duration of this war.
We forget how rich we are here in the United States. We’re footing some huge bills, but that doesn’t mean it’s going our way. My blood boils when I hear the news commentators telling us to “save for your child’s college education.” Work harder! Work more and more and more! We need more sacrifice! More “hope”! And once you build up the economy, they’ll squander the wealth in a worthless war, and their same commentators are going to be selling you the next war you need to fund. Honestly. Just watch this clip of Bill O’Reilly, the most popular news commentator on television.
Everything that Sunsara Taylor is saying is completely true. Our rights are being ripped away, the Patriot Act, torture…. and Bill O’Reilly calls her a lunatic from the land of Oz! O’Reilly’s arguments are beyond childish. He avoids all facts and intelligent discussion, and only polarizes the left/right paradigm.
The guy is an absolute moron. Or is he? The Washington Post reports that he signed a deal with Fox News, paying him $10 million per year.
What would you say in front of a camera for $10 million a year?
Fox News commentator Glenn Beck is also being paid around the same amount. Huffington Post reports that he signed a contract for $50 million over 5 years.
These guys are highly paid actors and are bringing the “news” to our households every night. Mom watches Glenn Beck, and Dad watches Bill O’Reilly. My cousin recently came up to me at a family picnic, claiming the last bastions of truth left in this world are Sean Hannity, and Rush Limbaugh.
The “Southern Avenger” explains my position on Sean Hannity.
And we should attempt to put the bail-outs in perspective. 20 Trillion. That’s approximately 20 times what we’ve spent on the wars. So let’s see. Approximately 1 trillion will pay for everyone’s college education for around 6~8 years. So 20 times that amounts to 120~160 years of funding everyone’s entire university education.
These numbers are so large they’re almost incomprehensible. I live in a university town, and frequently walk around the campus. There are many beautiful buildings, and in the mornings I see students all over the place walking to class. Thousands of students. Beautiful buildings. Sidewalks. Inside each building there’s research going on in bridge building, electronics, quantum mechanics, and more.
I look around and think to myself, “These bankers have stolen enough money to fund every student’s tuition across this entire campus, and all others across this nation, for over a century.” A century. Think about that for a second. A century. And we sit back in apathy saying, “What can we do?”
Banks and wars have to go. Helping kids get educated, and investment in research and technology has to come in.
Here are some highlights from the Huffington Post article on the Federal Reserve, and their stranglehold on the economics profession. This stuff in unbelievable. The more I dig, the more this kind of stuff keeps surfacing.
The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.
This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed’s thrall, the economists missed it, too.
“The Fed has a lock on the economics world,” says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. “There is no room for other views, which I guess is why economists got it so wrong.”
One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past.
The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after “flipping” had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that “a national severe price distortion [is] most unlikely.” A year later, current Chairman Ben Bernanke said that the boom “largely reflect strong economic fundamentals.”
The Fed also failed to sufficiently regulate major financial institutions, with Greenspan — and the dominant economists — believing that the banks would regulate themselves in their own self-interest.
Despite all this, Bernanke has been nominated for a second term by President Obama.
In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.
Before reading this article I knew the Fed was powerful, but I had no idea how vast their control of economic journals is. The Fed has embedded itself so deep in the system that economists who dissent against their policies are “kicked out” of the “club”. The majority of all editorial posts of the major economic journals are affiliated with the Fed, or have been in the past. And a lot of them are on their payroll.
The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank’s money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.
“Try to publish an article critical of the Fed with an editor who works for the Fed,” says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.
The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it’s just the Fed.
Being on the Fed payroll isn’t just about the money, either. A relationship with the Fed carries prestige; invitations to Fed conferences and offers of visiting scholarships with the bank signal a rising star or an economist who has arrived.
Economics professors struggle to get tenure these days unless they subscribe to Fed policies. In order to get tenure a professor must be publishing papers in top journals, but the Fed has a tight stranglehold on most all the top journals!
Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.
And while most academic disciplines and top-tier journals are controlled by some defining paradigm, in an academic field like poetry, that situation can do no harm other than to, perhaps, a forest of trees. Economics, unfortunately, collides with reality — as it did with the Fed’s incorrect reading of the housing bubble and failure to regulate financial institutions. Neither was a matter of incompetence, but both resulted from the Fed’s unchallenged assumptions about the way the market worked.
Top economists were trying to tell us about the housing bubble, the lax lending standards, and more, but they had no way to get an audience with their peers, or the people. The journals wouldn’t let them publish.
And the news networks are just as guilty. Even when they would have these economists on their programs, like Peter Schiff for instance, the network portrayed them in such a way as not to be taken seriously. They’d have three economists claiming booms, and one naysayer, who was branded a doomsday prophet, out of touch with the economy and his colleagues. And of course the person at home watching has no idea what any of them are talking about, so simply assumes, “Well, if 3/4 of them are saying we’ll have a boom, that must be the case.” Fair and balanced.
Rosner, the Wall Street analyst who foresaw the crash, says that the Fed’s ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.
He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy. That, of course, is exactly what happened and it took the Fed and the economics field completely by surprise.
“What you’re doing is, actually, in order to get published, having to whittle down or narrow what might otherwise be oppositional or expansionary views,” says Rosner. “The only way you can actually get in a journal is by subscribing to the views of one of the journals.”
The Fed has formed a club, and if you’re not “in” with them, it’s much harder for your voice to be heard.
Economist Rob Johnson serves on the UN Commission of Experts on Finance and International Monetary Reform and was a top economist on the Senate banking committee under both a Democratic and Republican chairman. He says that the consulting gigs shouldn’t be looked at “like it’s a payoff, like money. I think it’s more being one of, part of, a club — being respected, invited to the conferences, have a hearing with the chairman, having all the prestige dimensions, as much as a paycheck.”
The Fed’s hiring of so many economists can be looked at in several ways, Johnson says, because the institution does, of course, need talented analysts. “You can look at it from a telescope, either direction. One, you can say well they’re reaching out, they’ve got a big budget and what they’re doing, I’d say, is canvassing as broad a range of talent,” he says. “You might call that the ‘healthy hypothesis.'”
The other hypothesis, he says, “is that they’re essentially using taxpayer money to wrap their arms around everybody that’s a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality.”
And being a celebrity won’t protect you either. Paul Krugman, winner of the Nobel Prize in economics, has been booted from “the Fed club”. He’s not even being invited to the major conferences about the field he himself invented. Dissent is not tolerated from within, or from the outside.
Take the case of Alan Blinder. Though he’s squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.
Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. “Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant,” says Johnson.
In closed-door meetings, Blinder did what so few do: challenged assumptions. “The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he’d come out and say, ‘Well, that’s not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.’ And it just created a stir inside–it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was
And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. “I’ve been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him,” Krugman said of Greenspan in a 2007 interview with Pacifica Radio’s Democracy Now! “Nobody really wants to cross him.”
An invitation to the annual conference, or some other blessing from the Fed, is a signal to the economic profession that you’re a certified member of the club. Even Krugman seems a bit burned by the slight. “And two years ago,” he said in 2007, “the conference was devoted to a field, new economic geography, that I invented, and I wasn’t invited.”
Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.