Nobel Prize-Winning Economist: Federal Reserve System is Corrupt and Undermines Democracy → Washingtons Blog
Nobel Prize-Winning Economist: Federal Reserve System is Corrupt and Undermines Democracy - Washingtons Blog

Thursday, March 4, 2010

Nobel Prize-Winning Economist: Federal Reserve System is Corrupt and Undermines Democracy


Joseph Stiglitz - former head economist at the World Bank and a nobel-prize winner - said yesterday that the very structure of the Federal Reserve system is so fraught with conflicts that it is "corrupt" and undermines democracy.

Stiglitz said:

If we [i.e. the World Bank] had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure.

Stiglitz pointed out that - if another country had presented a plan to reform its financial system, and included a regulatory regime that copied the makeup of the Federal Reserve system - "it would have been a big signal that something is wrong."

Stiglitz stressed that the Fed banks have clear conflicts of interest, since the banks are largely governed by a board of directors that includes officers of the very banks they're supposed to be overseeing:

So, these are the guys who appointed the guy who bailed them out ... Is that a conflict of interest?

They would say, 'no conflict of interest, we were just doing our job. But you have to look at the conflicts of interest"...

The reason you talk about governance is because in a democracy you want people to have confidence ... This is a structure that will undermine confidence in a democracy.
Indeed, by all objective measures, the Fed has performed horribly (and see this).

As 6 congressmen wrote last November, there are at least 4 reasons to demand full transparency of the Federal Reserve, and a change in the Fed's structure:
First ... how effective a regulator can the Federal Reserve be if it is unwilling to strive for good public policy through its regulatory powers?

Second, there is an inherent conflict in the manner in which regional reserve branch presidents are selected – in that representatives of the member banks select the regional president. It seems counterproductive, yet the banking system has provided case after case of regulated entities selecting their own regulator.

Third, the Federal Reserve has continually resisted efforts to engage in discussion on structural and governance reform at the System. Most recently, Bloomberg reported yesterday that the Federal Reserve has rejected a White House request that [the Federal Reserve] conduct a public review of its structure and operations.

Despite a request from the administration that provided ample opportunity for the Federal Reserve to have input into its own reforms, the central bank has simply refused. It is because of this attitude that I argue that real financial regulatory reform cannot occur without an examination into the structure of this entity.

Fourth, and most importantly, the Federal Reserve has shown a repeated unwillingness to accept efforts to improve transparency for the System.

34 comments:

  1. The Federal Reserve is a private concern, it loans money it creates out of thin air, at interest. If a government can create a bond it can create a dollar, without interest going to a private party. You do not have to audit 'The Fed' just demand our US Treasury to create enough money to pay the debt. Anyone ending up with all the money will be better than a audit, if they have all the coin, the whole world will know and be able to watch them for unsavory business. Much better than a audit, it removes the monopolistic control of banking.

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  2. The odd thing is...the Federal Reserve is under the IMF?

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  3. ...and now Repubs in the Senate want to embody a "consumer protecting regulatory body" within the Federal Reserve. Unbelievable.

    That would be like having convicted sex offenders tasked with answering the phones for a rape and sexual harassment hotline, because they have "experience" with the issue. Think about it...

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  4. Hi,

    Can someone please tell me if the US dollar declines so much that they institute a new currency, will this help clean away some of the debt? Sorry, I'm trying to understand.

    if they do create new currency what will this mean for the value of gold and will a new currency, devalued, mean lower wages and a wipe out of current pensions. thanks to anyone.

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  5. The Law allowing for the Federal Reserve Bank was passed over a vacation when many Congressmen and Senators were not even around! It was planned ahead of time(see THE CREATURE OF JECKYLL ISLAND) and introduced by the Democrats as everyone knows Republians love the moneychangers in the temples. Corrupt? you betcha! Worthy of destruction? Not one doubt!

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  6. I would like to applaud Joseph Stiglitz for putting the problem with the fed into sharp focus at a high level. If the administration is truly interested in opening Fed activities to view, I would have to believe it could do so straight away. If the president gives the fed chief an order and he he doesn't obey I should think he could just fire him or get the congress to do so.

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  7. Sorry Larrytm but the Federal Reserve is a private entity. The Government has no control over firing and hiring, only the Federal Reserve does.

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  8. It's interesting that whenever so-called progressives call for greater regulation, they never mention auditing the Fed.

    It's like a robber goes into a bank, holds the teller at gunpoint, and then a minute later turns around and comes back with the money and a deposit slip. And when the cops arrive, they don't ask how the robber got the money, they just make sure the deposit slip is properly filled out!

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  9. How many loud mouthed fools does it take to unscrew a country? As for Anonymous who questioned if the Fed was part of the IMF, I question what part of the "grassroots" movement or "Tea Party" he or she's a member of...obviously the second Anonymous commentator after him is on the same wavelength with his or her (as the case may be) opinion about what is perverse. And as for Stiglitz, I did find his comments clarifying and relevant to the comments I've made about the Anonymous commentators above.

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  10. status quo is the most powerful force in government. good luck changing the Fed Joe. Money is at stake.

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  11. The funny thing is that the IMF was created and is ran by the same people who control the private stock in the federal reserve (think Rothchild). The scarry thing is the reason the IMF was created to be the finacial authority of the federal reserve on purpose. This is a political move and very covert. The one world government is coming and the last thing in it's way is the dollar. We are all at fault because we as spineless americans put up with it and went about our debt slaved jobs. With television and prescription dope to brave new world us all. There is no reason to applaud this economist. Any true economic thought is out of the austrian camp and seen this decades ago and is nothing new, many have stated this valid point and have been laughed at (Eustace Mullins) , locked up (Ezra pound)and even killed or assassinated. This is scary cause the IMF is puttin it out there and the Bank of International Settlements will pull the trigger on the fed. This is Germany being played all over again except it will be the american people. does anyone think this makes sense?

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  12. The funny thing is that the IMF was created and is ran by the same people who control the private stock in the federal reserve (think Rothchild). The scarry thing is the reason the IMF was created to be the finacial authority of the federal reserve on purpose. This is a political move and very covert. The one world government is coming and the last thing in it's way is the dollar. We are all at fault because we as spineless americans put up with it and went about our debt slaved jobs. With television and prescription dope to brave new world us all. There is no reason to applaud this economist. Any true economic thought is out of the austrian camp and seen this decades ago and is nothing new, many have stated this valid point and have been laughed at (Eustace Mullins) , locked up (Ezra pound)and even killed or assassinated. This is scary cause the IMF is puttin it out there and the Bank of International Settlements will pull the trigger on the fed. This is Germany being played all over again except it will be the american people. bobcox out

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  13. ABOLISH THE FED!

    It's a parasite and that's all.

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  14. Why is the discussion centered around the Federal Reserve? It shouldn't be, the discussion should be centered on Goldman Sachs and Wall Street, why? That's simple, for starters read this:

    "In the biggest stock sale of his life, former Treasury Secretary Hank Paulson didn't pay one dollar of capital gains tax. Nearly $500 million worth of Goldman Sachs shares - a profit of hundreds of millions of dollars - and not a red cent went to the IRS. Paulson's Treasury predecessors Robert Rubin and Paul O'Neil enjoyed a similar tax dodge themselves...as did many other familiar Washingtonians over the last 20 years, like Donald Rumsfeld and Donald Evans."

    Goldman Sachs runs the economy, their economy because I sure don't plan on contributing to it and neither should any of you. Money creation is alchemy, an esoteric art and unless you understand it you either profit enormously as a predator, or you are doomed to salvaging on the streets picking up scraps to survive off. America was a business from the very beginning and the guy on the street actually thought it was for him, impressive hey?

    And guess what they've got coming now as Wall Street and London phase out their system, they're going to start charging you to breath out Co2 and replace money with a money based on the commodity they created called Co2. That's what 911 was all about, the Chicago gang against the New York gang in a turf war to control this market, ask Carlton Bartels (Cantor Fitzgerald), of course he's dead, but I can't help to wonder what he thought when that plane slammed into the building and he was next?

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  15. Actually, the Fed is not so much as a private institution, but operates more as a sovereign state--as in the way the Vatican is recognized as such.

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  16. There is a movement behind the scenes (with teeth) that is ready to come into the open - that has been collecting evidence against the fed and its illegal practices. The fed WILL be ending shortly. The crooks know this and are horrified enough to try to pay of their debts with tungsten filled gold bars. The fed is bankrupt and will not be getting out back together.....

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  17. IT IS EASIER TO COMMIT MAJOR CRIME & GET AWAY WITH SAME BASICALLY DUE TO THE AVARICIOUS GREED OF "HUMAN"BEINGS & ADHERENTS WHO GOVERN US.

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  18. Do the people who want to End the Fed, really want to end their dollars? I agree that in order to create a one world currency (IMF's SDR maybe) you may need to get rid of the dollar.

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  19. imf is just try to look like the good guy so it could come out with a one world currency buit there just as big of scum bags as the fedral reserve which the fedral resevrve is one of the biggest players in the imf

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  20. This country was, and never has been a democracy. We were established a Republic. Not sure why this fact continues to be ignored.

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  21. "If any citizen of the United States shall accept, claim, receive, or retain any title of nobility or honour, or accept and retain any present, pension, office, or emolument of any kind whatever, from any emperor, king, prince, foreign power, or secret society, such person shall cease to be a citizen of the United States, and shall be incapable of holding any office of trust or profit under them, or either of them."

    TONA2009

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  22. The Federal Reserve was formed by LAW passed in 1913, the same year as the 14th Amendment to the Constitution which was NEVER properly ratified, but NO MATTER, the Government has so ruled. We COULD get out of ALL our "Debt" to the Illegal Fed by REVERSING the BILL which formed it; in fact, there was an ESCAPE CLAUSE contained within the Bill but no one ever discusses it.

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  23. PRISONPLANET.com


    'nuf said.

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  24. I understand the article but the "Nobel Prize" is like- who cares, anybody can get one of those. Look at Al Gore and Obama. Who else has gotten one of those that is a pathetic liar, warmonger, etc.... The Nobel prize judges must be about as smart as the pile my dog just left out back. Good article though.

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  25. Paul Krugman also has a nobel peace prize. In my opinion the only reason Stiglitz (chief economist for the Socialist International) would berate the Fed would be to make the World Bank and IMF look "more" democratic, and more acceptable, to Americans who know that something is wrong but don't make any effort to really get to the bottom of it. He is an internationalist, nothing more.

    JO

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  26. and, on the lighter side of Fed perfidy: http://bit.ly/d3VPEr

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  27. Kill the Fed, period. Restore control of our money as per the dictates of the constitution. The fed is a private cartel protected by government. Any questions as to who the Fed serves as it's owned by banks and run for their collective interest. end of rant.

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  28. Talking of nobel prize winners lets not forget Milton Friedman, after all he bares as much responsibility for the mess we're in as anyone you care to mention.

    However, having read a couple of Stiglitz's books he doesn't strike me as an elitist and I don't get the impression that what he was saying in the article was meant to bolster any disingenuous claim by the IMF to have separation from the rest of the rotten system.

    I felt he was just trying to say that even by the standards set by the IMF or World Bank, both of whom have been explicit in spreading free market fundamentalism, the federal reserve would not be a desirable institution to have placed at the heart of the economy.

    He's exposing the hypocrisy amongst the major players more than anything else and on that basis alone he should be commended.

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  29. Pardon me, but haven't we been applying Supply Side Economics since Regan sold us that bill of goods in the 80's? I'm still waiting for somebody to explain to me how Austrian Supply Side economics is different. Anybody who thinks that the markets and or corporations do not need regulating has not been paying attention lately. Ellen Brown has the answer to the Fed problem.

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  30. JFK had it right when he had the US treasury distribute silver certificate dollars to replace the federal reserve note. To bad that he was assasinated shortly after that, and we went back to the Fed note. (coincidence)?

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  31. Thomas Jefferson summed it up best:

    "I sincerely believe the banking establishment is more dangerous to our liberties than standing armies."

    Please, Americans, go back to your roots: Read and understand your Constitution. It is a wonderful document. There is nothing about the Federal Reserve that is constitutional! Ron Paul is right: Abolish the Federal Reserve. Have no Central Bank. Allow the people to decide what currency will be. Allow private mints. Free people will flock to honest money: Gold, silver and even copper or nickel for lower face values.

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  32. Ron Paul's bill to audit the Federal Reserve HR1207 has passed the house but is stalled in the Senate even with well over 300 co-sponsers.
    Please, everyone, contact your senators, put pressure on them to bring this bill to the floor for a straight up and down vote WITHOUT making changes to dilute even more than has been done todate.

    The structure of a democracy and a constitutional republic are very different, and for very good reason our founding fathers choose the latter.
    It is very frustrating when we keep hearing academics, talking heads and politicians calling our political structure a democracy.
    A democracy quickly becomes mobocracy and then fails as they all have throughout history.

    There is no such thing as a perfect plane, but I would urge anyone who has not done so to spend a little time looking at Austrian economics. I think an inquiring mind may have a few aha moments.

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  33. End the Fed. Dissolve our tyrannical Federal Government. Return all power back to the states. Let the states reinstitute a new weaker central government with the proviso that the states have a responsibilty to keep it in check. Kick the UN out on NY and bring all our soldiers home. If we are going to be the arsenal for democracy it better be our own. We should not pay back one cent to communist china that kept lending to a bankrupt tyrant.

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  34. for anyone who is interested in a real tangible mathematic evaluation of the problem and a solution this is as good of a place to start as any... just the numbers and a little history lesson... none of the irrelevant conspiracy stuff... just a mathematical evaluation that gives it to ya in black and white... http://www.perfecteconomy.com/

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