Fresh From Their Debt Ceiling Extortion Game, Republicans Turn to Bullying the Fed

Members of the Federal Reserve’s Open Market Committee woke up earlier this week to find a dead fish placed on the steps of the Marriner Eccles building in Washington. Everyone knows this is a traditional Mafioso warning to the recipient that they are soon to be “sleeping with the fishes”. But who would have the audacity to so-crudely threaten the distinguished and eminent governors and presidents of the Federal Reserve System? How about those masters of intimidation and economic terrorism, the Republican Leadership in Congress.

Yes, the warning came collectively from Mitch McConnell, Jon Kyl, John Boehner, and Eric Cantor, in the form of a letter to Fed Chairman Ben Bernanke ordering him not to institute any more monetary easing. The timing was exquisitely deliberate: a day before the FOMC was due to meet to discuss monetary policy and – according to many insider reports – vote to approve some new form of Quantitative Easing.

The letter didn’t exactly say that if the Fed voted for more monetary stimulus the august members of the FOMC would find cement blocks placed around their feet, but it didn’t need to. These are the same Republican leaders who just recently threatened to throw the United States into default if they didn’t get their way. They’ve already got cement blocks placed around the feet of Barack Obama, so they’ve certainly established their bona fides for murderous thuggery.

The letter does make the valid point that the previous two rounds of Quantitative Easing have failed, and in fact caused more uncertainty on the inflationary front than otherwise. If the writers had then gone on to decry the effect this inflationary surge has had on the average American, you would almost believe the Republicans were slightly sympathetic to the economic pain people are feeling in this depression. But the letter makes no such allusion, because the Republicans aren’t interested in the economic welfare of the average American. In fact, they want more economic pain inflicted on the American people – just enough to force them to vote out that Democrat in the White House in 2012.

This is, after all, the publicly stated policy of the Republican Party, as enunciated by Sen. Mitch McConnell immediately after Barack Obama’s election. All else stands subordinate to this goal, though taking over the Senate is a close second in importance. The letter sent this week from the Republican Leadership may be couched in economic language, but it is as nakedly political a document as we are likely ever to see in Washington.

Experienced Fed watchers are describing this threat as unprecedented, which may be true looking back over nearly a century of history for a central bank which cultivated and prided itself on its independence and ability to stay above the political fray. Those days are gone. Fed Chairman Ben Bernanke is already under a death threat from Gov. Rick Perry, the front-runner for the Republican nomination for president, who accused Bernanke of “treason” if he dared to interfere in Perry’s road to the White House by establishing any more Quantitative Easing. Do you think Ben Bernanke is going to give a rousing talk of encouragement to his FOMC colleagues so they will approve another half a trillion dollars or so of Quantitative Easing added to the Fed balance sheet?

Not very likely. Not when every member of the committee has a copy of the Republican Leadership letter in their folder before them, and the smell of rotten fish permeates the board room. Miracles do happen, and it is theoretically possible that the FOMC will come storming out of the building with a massive QE3 program in place, ready to take one last suicidal stand for Federal Reserve independence. More likely, the FOMC is going to approve this afternoon some whisper of a change to policy – something like lowering reserve requirements on banks to near zero percent, or shifting their balance sheet holdings to later-maturity instruments, in the form of Operation Twist. Just the sort of things that are relatively meaningless to the economy, and won’t prevent the deflationary tidal wave from reaching our shores, but will allow the Federal Reserve to dress itself in a fig leaf of independence.

The market may get excited with this new form of monetary stimulus, but it will only be temporary. In a short matter of time the market will understand the Fed is finished – washed up – neutered and out of the monetary stimulus game altogether until a new president comes along in 2012 and decides to let them out of their marble cage on L Street. But for that to happen, they will have to be on their best behavior. If there is going to be any more monetary stimulus, it is going to be designed to do the one thing Messrs. McConnell, Kyl, Boehner, and Cantor deem vastly more important than helping Americans in economic distress – helping Republicans obtain and keep power.



he sleeps with the fishes

Nice article! I find it incredible that politicians can threaten other officials and nothing happens. I think if a regular citizen said what Perry said, the FBI would be knocking at their door.

Why aren't they writing letters when the Fed opened up unlimited loans to Europe through swaps? That's a crowd pleaser, bailing out foreign banks.

I think your conclusion is right. They are out to win at all costs and people hate the Fed, think monetary theory, fractional reserve banking is the root of all evil.

This is what happens when "free" "documentaries are released on the Internet which take a few facts and twist them into some sort of grand conspiracy theory. If only there were a few "documentaries" on the radical right. Sure needs to be some because you're right, they want to wipe out the U.S. middle class and clearly, by their actions, don't care about the people of the United States and even the macro-economic level economy.

Speaking of Perry: What a Deceiver

Turns out all his bragging about jobs in Texas left out a crucial few points: most of the jobs created since 2007 went to immigrants. Will this story get much coverage -- will his fellow candidates call him out on his misleading assertions -- or will they prefer to let the sleeping jobless issue alone?

I hope he gets nailed big time but I figure this story will be ignored and not affect his election chances one bit.

"But analysis of Current Population Survey (CPS) data collected by the Census Bureau show that immigrants (legal and illegal) have been the primary beneficiaries of this growth since 2007, not native-born workers. This is true even though the native-born accounted for the vast majority of growth in the working-age population (age 16 to 65) in Texas. ...

• Of jobs created in Texas since 2007, 81 percent were taken by newly arrived immigrant workers (legal and illegal).

• In terms of numbers, between the second quarter of 2007, right before the recession began, and the second quarter of 2011, total employment in Texas increased by 279,000. Of this, 225,000 jobs went to immigrants (legal and illegal) who arrived in the United States in 2007 or later.

• The large share of job growth that went to immigrants is surprising because the native-born accounted for 69 percent of the growth in Texas’ working-age population (16 to 65). Thus, even though natives made up most of the growth in potential workers, most of the job growth went to immigrants."

The full article is lengthy and has got charts and footnotes too!

Wrong -- And Glad to Be Wrong

There's an article about this already over at Huffington Post. So at least this is getting coverage. But will it be used against Perry? Let us hope so.

Also at Huffington Post, another labor article of interest to people here. This one's about what states are losing the most jobs to China:

Perry, O'Rly?

Aha, the Huffington Post can use research for the Center for Immigration Studies when it comes to Perry but if someone else uses any of their studies, they are a racist, funded by the KKK and should be chased to the dark edge of hell?

HO Ho Ho! I saw this and I'll read the study and try to trace their numbers.

But for now it looks like Perry never met a H-1B Visa he didn't like.

I sure hope as hell they use this again him, last thing we need is yet another global labor arbitrager in the white house, only been going on since 1990.

Never concede the low ground

Robert Oak summarizes Machiavellian strategy of the RNC and current GOP congressional leaders as based on the idea that "people hate the Fed, think monetary theory, fractional reserve banking is the root of all evil."

That makes it sound as if monetary theory (or 'monetarism') equates to fractional reserve banking, at least in the thinking of ordinary people.

If that is the thinking of ordinary people, then let's correct it immediately, for reasons of political strategy based on the Clausewitzian understanding of the interrelation of politics and warfare.

Volgograd (formerly Stalingrad, from

Volgograd (formerly Stalingrad) in upper right (northeast quadrant) with Black Sea to the southwest and Caspian sea to the southeast, Caucasus Mountains to the south (map taken from public domain


The Russians "held out against the enormous German army, decimating and wearing it out, until a relieving force encircled the city compelling the invaders to surrender." (

It's my view that we are always wrong to concede the populist low ground. Such low-lying areas are like the plains north of the Caucasus -- where the most important battles were fought.

I have been informed by a soldier who served on Germany's eastern front in World War II, that after the fall of Stalingrad, 2 February 1943, everyone east of Berlin knew the truth, that the war was over and Hitler had blown it.

Yes, we prefer high hard ground for our HQ, but never concede the low ground!

With regard to [accessible] ground ... be before the enemy in occupying the raised and sunny spots, and carefully guard your line of supplies. Then you will be able to fight with advantage.

---  Sun Tzu, The Art of War (Chapter X, Verse 3), available at MIT classics


Wannabe populists (RNC opinion 'engineers') think they have captured the key location in the public mind, but they are surrounded on all sides. They are over-extended. Their only hope is to put Romney in command, but they are too arrogant to realize that.


Joe Sixpack hates 'monetary theory'?

Maybe Joe Sixpack hates all theory ... or anyway all theorists!

Pat Bagley cartoon from SMC 3 July 2011

Pat Begley cartoon from Sunday Morning Comics, 3 July 2011, 'Who's Afraid of the Big Bad Bank?' edition


Couldn't blame Joe if he did! See, Paul Krugman's 'The Unwisdom of Elites' (NYT archive from 8 May 2011)

Many schools of monetary theory reject fractional reserve banking. Although the term "monetary reform" may take on a range of meanings, it can be understood as specifically referring to politico-economic policy that would eliminate fractional reserve banking. (See, Wiki article 'Monetary_reform')

Monetary theory can be seen as simply one tool in the economist's toolbox -- one approach to understanding socio-economic history or behavior, and related politico-economic phenomena. In and of itself, "monetary theory" can hardly be thought to demand either support for, or criticism of, fractional reserve banking.

However, the American Monetary Institute (AMI) -- leading source of education on pure monetary theory (i.e., monetarism free of gold buggery) -- supports the American Monetary Act.

See, "Introduction to Monetary Reform" (AMI) --

History shows that ... private interests, if given any privileged power over money, eventually undermine the public interest, and take over the whole thing. We know this from historical case studies in at least 4 major historical situations – the U.S. “Greenbacks”, The nationalization of the Bank of England, and the Canadian and New Zealand monetary experience. Anyone who proposes allowing the banks to keep any part of the power to create money are either ignorant of monetary history or are shilling for the banks.

Under the American Monetary Act we do have the best of both worlds.  We keep the benefits of having the professionalism and expertise of a competitive banking system in the private sector, but we take away the dangers of having them dominate our monetary and public policies with their narrow short term profit focus, by removing their privilege to create money. Ultimately this is a question of morality. No such special privileges can be allowed to particular groups; especially the monetary privilege, which confers power and wealth on them at the expense of the rest of society.


Joe and Jane just might be ready for exactly that kind of talk! smiley enlightened yes

The American Monetary Institute is the leading exponent today of the original (Henry C. Simons) formulation of libertarian economics (economics premised on priority of individual liberty).

See also, Stephen Zarlenga's 'The 1930's Chicago Plan and the American Monetary Act'