One day last week, at the Occupy Kansas City site near the Federal Reserve Bank of Kansas City, a dreadlocked and heavily pierced individual, who identified himself as Rocky, brandished a piece of cardboard that accused the Fed of treason. Among Rocky’s complaints was (I think) the obscure moment in rock history when Alice Cooper’s Billion Dollar Babies album was delayed at the printer because of concerns about the way currency was used in the artwork. It was actually the Secret Service that temporarily stopped the presses, but I got his drift.
Rocky wasn't alone. I spoke with another demonstrator at Occupy Kansas City, a retiree, who called the Federal Reserve a "cartel" and spoke of "fiat" currency, which Congressman Ron Paul, the patron saint of the End the Fed movement, defines as "money that can be inflated or increased at the push of a button at the say-so of a powerful person or organization."
Occupy Wall Street is, at its heart, a rejection of the financialization of the U.S. economy. Much of the income inequality in this country can be attributed to the fact that the finance sector became so vast and destructive. Adair Turner, the chairman of the Financial Services Authority in Great Britain, has complained that much of what happens in the world’s financial capitals is "socially useless activity."
But how much is the Fed to blame for this uselessness? Has the Ron Paul wing of the Occupy Wall Street movement misidentified the real villain?
Occupiers who are frustrated by their inability to escape the underclass should be at least open to the idea that they have a few friends at the Federal Reserve. After all, it was a former Federal Reserve chairman, Paul Volcker, who has said the last financial innovation worth a damn was the ATM.
The current Fed chairman, Ben Bernanke, was asked about the Occupy Wall Street movement at a recent congressional hearing. He sounded sympathetic to the cause:
"Like everyone else, I'm dissatisfied with what the economy's doing right now. They blame, with some justification, the problems in the financial sector for getting us into this mess, and they're dissatisfied with the policy response here in Washington. And at some level, I can't blame them."
The Federal Reserve sets U.S. monetary policy with two goals in mind: Promote employment and keep inflation under control. It's a delicate balance. Still, Charles Evans, president of the Federal Reserve Bank of Chicago, thinks the fight against joblessness needs to be more aggressive. He gave a speech in early September in which he suggested that if inflation numbers were as bad as unemployment numbers, people "would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market."
Tom Hoenig, the recently retired president of the Kansas City Fed, was one of the inflation worrywarts Evans was trying to goad. But Hoenig was not a hopeless case. In his long career at the Fed, he advanced some ideas that the Occupy Wall Street demonstrators might greet with a "hell, yeah!"
Hoenig, for instance, has called for breaking up supersized banks. “Extremely powerful institutions, both financially and politically, undermine the long-term strength of our system and make us look like a financial oligarchy,” he told The New York Times financial columnist Gretchen Morgenson in August.
As Morgenson points out, Hoenig warned about big, interconnected financial companies long before the 2008 financial crisis. In 1999, for instance, he spoke about his worry of "a world dominated by mega financial institutions."
Alas, the domination took place. And when the game of Risk came to an end, taxpayers were asked to pick up the pieces and put them back in a very expensive box.
The Fed's secretiveness and inscrutability make it an easy target. But abolishing it won't rid the world of plutocrats.