The Federal Reserve needs more money to continue purchasing US government debt, the aggregate amount of which is soaring because of ballooning deficits. But the Fed has a problem.
The US government doesn’t pay its bills with ‘cash currency’, the green paper Americans carry around in their pocket. So the Fed cannot crank up the printing press like central banks did in Weimar Germany in the 1920s, or in recent years, in Zimbabwe … //
… Side-stepping congressional authority like this is further evidence that the Federal Reserve sees itself as unaccountable to the general public – as if not identifying who received the Federal bailout money was not enough proof of this point already.
But the Fed’s devious maneuver here illustrates something much more important, namely, the reason the Federal Reserve exists.
Despite what Fed officials may declare in testimony before Congress, the Federal Reserve does not exist to fight inflation, provide full employment or achieve any of the other laudable goals attributed to it. The Federal Reserve exists solely to provide the US government with all the dollars it wants to spend, even if it has to side-step congressional authority to do it.
There is of course a biting irony in that conclusion, given that Congress is part of the US government. And Congress is as much to blame for the government’s horrific deficits and fiscal madness as the president or anyone else in Washington. So why would the Fed need to side-step Congress?
It is because central banks like to operate in the dark. That is why they meet behind closed doors and resist public scrutiny, as evident from their current effort to stop Ron Paul’s bill to audit the Fed. But we shouldn’t be surprised by the Federal Reserve’s conduct. After all, I have already explained why central banks are a barbarous relic. (full text).