The basic characteristic of an overextended government is that its institutions are rotten. Take the U.S. Post Office, for instance. It lost $15.9 billion in 2012. That’s over $43.5 million per day – flushed down the toilet – for an entire year.
It’s no wonder why the Postal Service recently defaulted on a 5.6 billion retiree health benefit payment. The obvious options should be to reduce costs, privatize or close the Postal Service completely. But for a rotten institution the obvious options are never acceptable. Nor are they allowable.
In fact, the 220,000 member American Postal Workers Union wants to mutiny Postmaster General Patrick Donahoe for proposing ideas – like no Saturday delivery – to bring costs down. Like the Ouroboros, the mythical serpent eating its own tail, the union would rather consume itself than accept a benefit cut or two.
It is this type of blockheaded thinking that got institutions like the Postal Service into the disagreeable place they currently find themselves to begin with. Year after year, decade after decade, decision makers forgot to do one critically important thing. They forgot to think.
Until 2008 their errors and mistakes were masked by an expanding economy. Budget shortfalls would quickly disappear as ever more abundant tax revenues flowed into the government coffers. Yet this didn’t mean the problems weren’t there all along. Moreover, the seeming lack of consequences allowed the problems to perpetuate.
Naturally, the Post Office is but one example of a rotten institution. Here’s another…
Legalizing the Money Power
The 100 year anniversary of the Federal Reserve will be notched on December 23. Not long after that, Janet Yellen will become its first Chairwoman. We’re not sure how the Federal Reserve has endured an entire century. It seems to have been rotten form the get go.
If you didn’t know, the Federal Reserve came into existence with the passing of the Federal Reserve Act. Inauspiciously, this law was pushed through Congress on December 23, 1913…two days before Christmas. The Act created the Federal Reserve, the central bank of the United States, and gave it legal authority to issue Federal Reserve Notes as legal tender.
Congressman Charles August Lindbergh Sr., father of aviation pioneer Charles Lindbergh, strongly opposed the Act. The Congressional Record, Vol. 51, p. 1446, documents his opposition at the time of its passing…
“This Act establishes the most gigantic trust on earth…. When the President signs this Act, the invisible government by the Money Power, proven to exist by the Money Trust Investigation, will be legalized…. The money power overawes the legislative and executive forces of the Nation and of the States. I have seen these forces exerted during the different stages of this bill….”
“The new law will create inflation whenever the trusts want inflation,” added Lindbergh. “It may not do so immediately, but the trusts want a period of inflation, because all the stocks they hold have gone down…. Now, if the trusts can get another period of inflation, they figure they can unload the stocks on the people at high prices during the excitement and then bring on a panic and buy them back at low prices….”
The New Era of Fed Activism
No doubt, since the Federal Reserve was created, inflation has been the order of the day. According to the Bureau of Labor Statistic’s inflation calculator, the dollar has lost 96 percent of its value since 1913 – the year the Fed was created.
Through this permanent process of inflation the Fed concentrates wealth at the top and cheats workers and savers. This process continues to the present. What’s more, Fed intervention into the economy and financial markets has never been greater.
Under Ben Bernanke’s leadership, the Fed pushed real interest rates below zero and inflated the money base over $3 trillion. This allowed the ultra-wealthy to borrow money for less than free and place big bets on inflating asset prices. Conversely, everyone else suffered as their wages, savings, and standard of living were eroded by inflation.
The more we learn about Janet Yellen the more we come to believe she will be the Fed chair to preside over the great dollar devaluation. She is a central banker par excellence. She believes if she creates enough money there will be jobs for everyone. It doesn’t matter if this causes getting to and from work to cost more in gas than the jobs actually pays.
The Federal Reserve is rotten to the core. It always has been. Like Ben Bernanke, Janet Yellen is a complete lunatic. But unlike Bernanke she’s an activist too. She’ll do anything for the sake of doing something…even if it ruins us all.
for Economic Prism