1 00:00:01,680 --> 00:00:06,359 Speaker 1: Call Zone Media. 2 00:00:06,600 --> 00:00:10,719 Speaker 2: Welcome to it could Happen here, a podcast about which 3 00:00:10,840 --> 00:00:15,560 Speaker 2: calamity this country and many others are going through. This week, 4 00:00:15,720 --> 00:00:20,160 Speaker 2: I am your host, Mia Wong, and today we are 5 00:00:20,239 --> 00:00:25,360 Speaker 2: going to be talking about the Federal Reserve. Now, those 6 00:00:25,400 --> 00:00:28,600 Speaker 2: of you who have listened to Executive Disorder are aware 7 00:00:28,840 --> 00:00:32,240 Speaker 2: that a bit over a week ago, as this episode 8 00:00:32,320 --> 00:00:37,160 Speaker 2: is being released, Federal Reserve Chairman jirom Age Powell released 9 00:00:37,720 --> 00:00:44,280 Speaker 2: what again I can really only describe as someone escaping 10 00:00:44,320 --> 00:00:48,120 Speaker 2: from a kidnapping and releasing a video about it in 11 00:00:48,200 --> 00:00:54,560 Speaker 2: which he discussed a Justice Department grand jury sabina and 12 00:00:54,640 --> 00:00:59,480 Speaker 2: a threat to indict him over cost overruns on a 13 00:00:59,600 --> 00:01:04,720 Speaker 2: new fe Federal Reserve building. Now, Jerome Powell has claimed 14 00:01:05,000 --> 00:01:10,639 Speaker 2: that these charges are really about removing him and about 15 00:01:10,680 --> 00:01:16,320 Speaker 2: eliminating the independence of the Federal Reserve. He also claims 16 00:01:16,360 --> 00:01:22,160 Speaker 2: that he was directly threatened with these charges unless he 17 00:01:22,360 --> 00:01:27,680 Speaker 2: was willing to adjust the Federal Reserve policy to fall 18 00:01:27,760 --> 00:01:33,440 Speaker 2: in line with the Trump administration. And this is an 19 00:01:33,480 --> 00:01:39,360 Speaker 2: astonishing video for a number of reasons. One is that 20 00:01:39,400 --> 00:01:42,080 Speaker 2: it's in a lot of ways one of the most 21 00:01:42,160 --> 00:01:46,759 Speaker 2: direct points of defiance that a government official has taken 22 00:01:46,880 --> 00:01:54,320 Speaker 2: directly to the presidents. It's also astonishing because it is 23 00:01:54,480 --> 00:01:59,360 Speaker 2: actually technically the second time that Trump has tried to 24 00:01:59,360 --> 00:02:01,720 Speaker 2: do something like this to a member of the Federal 25 00:02:01,800 --> 00:02:06,640 Speaker 2: Reserve Board. Because as you're listening to this, the Supreme 26 00:02:06,680 --> 00:02:11,920 Speaker 2: Court has been hearing arguments about Trump's attempt to fire 27 00:02:12,400 --> 00:02:15,280 Speaker 2: one of the other members of the Federal Reserve Board, 28 00:02:15,280 --> 00:02:20,040 Speaker 2: a woman named Lisa Cook. Now, obviously I don't know 29 00:02:20,160 --> 00:02:24,480 Speaker 2: yet what the outcome of that deliberation is going to be. 30 00:02:24,639 --> 00:02:30,520 Speaker 2: It seems right now that the Supreme Court is uncompelled 31 00:02:30,680 --> 00:02:34,959 Speaker 2: with Trump's ability to fire a Federal Reserve Board member 32 00:02:35,200 --> 00:02:41,360 Speaker 2: over really truly very trumped up charges about mortgage fraud. 33 00:02:41,800 --> 00:02:45,880 Speaker 2: I'm going to quote here from the Supreme Court in 34 00:02:45,960 --> 00:02:50,120 Speaker 2: what has become a very important statement. Quote, the Federal 35 00:02:50,200 --> 00:02:54,800 Speaker 2: Reserve is a uniquely structured, quasi private entity that follows 36 00:02:54,840 --> 00:02:57,600 Speaker 2: in the distinct tradition of the First and Second Banks 37 00:02:57,600 --> 00:03:01,720 Speaker 2: of the United States. Importance of this statement is that 38 00:03:01,760 --> 00:03:04,720 Speaker 2: the Supreme Court has been willing to allow Trump to 39 00:03:04,840 --> 00:03:08,120 Speaker 2: fire the heads of other you know, what are supposed 40 00:03:08,160 --> 00:03:10,640 Speaker 2: to be independent entities, right, or fire members of what 41 00:03:10,639 --> 00:03:14,640 Speaker 2: are supposed to be independent federal agencies. He's been able 42 00:03:14,680 --> 00:03:16,880 Speaker 2: to just completely illegally, by the way, but with the 43 00:03:16,919 --> 00:03:20,160 Speaker 2: approval the Supreme Court been able to fire a lot 44 00:03:20,360 --> 00:03:23,639 Speaker 2: of people who were appointed under the Biden administration to 45 00:03:25,120 --> 00:03:30,600 Speaker 2: posts in independent regulatory agencies. However, so far the Supreme 46 00:03:30,680 --> 00:03:35,920 Speaker 2: Court has balked at doing this for the Federal Reserve. Now, 47 00:03:36,080 --> 00:03:41,080 Speaker 2: why is that and why is this entire thing so important? 48 00:03:41,840 --> 00:03:44,680 Speaker 2: To understand that question and to understand why I've spent 49 00:03:44,760 --> 00:03:48,680 Speaker 2: so much time talking about what in the grand scheme 50 00:03:48,720 --> 00:03:52,560 Speaker 2: of things seems like a kind of minor, you know, 51 00:03:52,800 --> 00:03:56,440 Speaker 2: just like another example of Trump attempting to use the 52 00:03:56,520 --> 00:04:01,760 Speaker 2: judiciary and investigations to go after his political enemies. We 53 00:04:02,400 --> 00:04:05,960 Speaker 2: need to talk about what the Federal Reserve is and 54 00:04:06,080 --> 00:04:13,000 Speaker 2: what it does, because this is ourguably the central institution 55 00:04:13,200 --> 00:04:19,520 Speaker 2: of global capitalism and its importance in maintaining the global 56 00:04:19,520 --> 00:04:25,280 Speaker 2: capitalist economy is to a large extent. The reason why 57 00:04:26,520 --> 00:04:30,760 Speaker 2: this is the point at which US senators, who are 58 00:04:30,760 --> 00:04:34,480 Speaker 2: aligned with Trump on every other issue have actively taken 59 00:04:34,560 --> 00:04:38,760 Speaker 2: a stand against this sort of prosecution of Jerome Powell 60 00:04:38,920 --> 00:04:43,120 Speaker 2: is why the Supreme Court seems to not be interested 61 00:04:43,160 --> 00:04:46,039 Speaker 2: in allowing Trump to wield the executive power. And this 62 00:04:46,240 --> 00:04:49,240 Speaker 2: is because fucking with the Federal Reserve is fucking with 63 00:04:49,320 --> 00:04:55,320 Speaker 2: the money. So what is the Federal Reserve? The Federal Reserve, 64 00:04:55,839 --> 00:05:00,560 Speaker 2: to put it mildly, is an extremely confusing entity. So 65 00:05:01,240 --> 00:05:04,520 Speaker 2: if you remember back to a few minutes ago when 66 00:05:04,560 --> 00:05:08,799 Speaker 2: I said that the Supreme Court said that the Federal 67 00:05:08,880 --> 00:05:13,880 Speaker 2: Reserve is a uniquely structured quasi private entity, we could 68 00:05:13,920 --> 00:05:16,760 Speaker 2: ask the question, Okay, so it's a quasi private entity. 69 00:05:17,040 --> 00:05:19,440 Speaker 2: Is it a public entity? Or is it a private entity? 70 00:05:20,120 --> 00:05:22,880 Speaker 2: This is a relatively simple question. Here is the answer 71 00:05:22,920 --> 00:05:27,720 Speaker 2: provided by the Saint Louis Federal Reserve's website quote. The 72 00:05:27,720 --> 00:05:31,320 Speaker 2: Federal Reserve Banks are not a part of the federal government, 73 00:05:31,320 --> 00:05:34,520 Speaker 2: but they exist because of an Act of Congress. Their 74 00:05:34,560 --> 00:05:37,960 Speaker 2: purpose is to serve the public. So is the FED 75 00:05:38,279 --> 00:05:43,520 Speaker 2: private or public? The answer is both. While the Board 76 00:05:43,520 --> 00:05:47,520 Speaker 2: of Governors is an independent government agency, the Federal Reserve 77 00:05:47,600 --> 00:05:52,400 Speaker 2: Banks are set up like private corporations. Member banks hold 78 00:05:52,480 --> 00:05:56,640 Speaker 2: stock in the Federal Reserve and earn dividends. Holding this 79 00:05:56,760 --> 00:06:00,360 Speaker 2: stock does not carry with it the control and financial 80 00:06:00,400 --> 00:06:05,080 Speaker 2: interests given to holders of common stock and for profit organizations. 81 00:06:05,440 --> 00:06:10,320 Speaker 2: The stock may not be sold or pleasures collateral for loans. Okay, 82 00:06:10,600 --> 00:06:13,599 Speaker 2: So here's the Federal Reserve's answer to is it a 83 00:06:13,640 --> 00:06:17,560 Speaker 2: public or private entity? Is both. The Board of Governors 84 00:06:17,640 --> 00:06:19,840 Speaker 2: is an independent agency. The Federal Reserve banks are set 85 00:06:19,880 --> 00:06:22,880 Speaker 2: up like private corporations. So it's sort of both. Okay, 86 00:06:23,080 --> 00:06:26,880 Speaker 2: question settled, it's both. We can move on. Wait, hold on, 87 00:06:27,080 --> 00:06:31,240 Speaker 2: I am receiving word that the Federal Reserve has comments 88 00:06:31,279 --> 00:06:34,359 Speaker 2: on this idea. Hold on, hold on, let me, let me. 89 00:06:34,440 --> 00:06:39,160 Speaker 2: Let me turn to the Federal Reserve, the National Federal 90 00:06:39,240 --> 00:06:43,360 Speaker 2: Reserves website, which has a comment on the idea that 91 00:06:43,520 --> 00:06:48,360 Speaker 2: the Federal Reserve banks or private entities. Okay, here we go, 92 00:06:48,440 --> 00:06:53,480 Speaker 2: Here we go quoting them. Now, some observers mistakenly consider 93 00:06:53,800 --> 00:06:57,360 Speaker 2: the Federal Reserve to be a private entity because the 94 00:06:57,400 --> 00:07:02,800 Speaker 2: Reserve banks are organized similar to private corporations. For instance, 95 00:07:02,880 --> 00:07:05,760 Speaker 2: each of the twelve reserve banks operates within its own 96 00:07:05,760 --> 00:07:09,600 Speaker 2: particular geographic area or district of the United States, and 97 00:07:09,680 --> 00:07:13,080 Speaker 2: each is incorporated, is separately incorporated and has its own 98 00:07:13,120 --> 00:07:17,400 Speaker 2: board of directors. Commercial banks that are members of the 99 00:07:17,440 --> 00:07:22,680 Speaker 2: Federal Reserve system hold stock in their district's reserve bank. Now, okay, 100 00:07:23,200 --> 00:07:25,680 Speaker 2: let's look at what we have here. These are two 101 00:07:25,760 --> 00:07:31,240 Speaker 2: different websites run by two different parts of the Federal Reserve, 102 00:07:32,120 --> 00:07:36,040 Speaker 2: one of which says that the Federal Reserve Banks are 103 00:07:36,080 --> 00:07:38,440 Speaker 2: not part of the of the federal government, but they 104 00:07:38,440 --> 00:07:40,880 Speaker 2: exist because of an Act of Congress. So is the 105 00:07:40,880 --> 00:07:44,360 Speaker 2: Fed public or private? The answer is both, because the 106 00:07:44,360 --> 00:07:47,400 Speaker 2: Federal Reserve banks are set up like private corporations. That's 107 00:07:47,520 --> 00:07:52,080 Speaker 2: the Saint Louis are Reserve. Now, the National Federal Reserve 108 00:07:52,360 --> 00:07:56,080 Speaker 2: says quote, some observers mistakenly consider the Federal Reserve to 109 00:07:56,120 --> 00:07:58,560 Speaker 2: be a private entity because the reserve banks are organized 110 00:07:58,600 --> 00:08:02,040 Speaker 2: similar leader private corporations. So you can see that we 111 00:08:02,080 --> 00:08:06,720 Speaker 2: are dealing here with an absolute goddamn mess because if 112 00:08:06,760 --> 00:08:11,320 Speaker 2: you read the two websites of different federal versions of 113 00:08:11,320 --> 00:08:14,240 Speaker 2: the Federal Reserve, National and sort of branches of the 114 00:08:14,240 --> 00:08:18,680 Speaker 2: Federal Reserve, they say different things about what it is, 115 00:08:18,840 --> 00:08:22,360 Speaker 2: and they sound like they're arguing each other. Now, Okay, 116 00:08:22,400 --> 00:08:26,360 Speaker 2: I am doing this because it's funny. Technically both of 117 00:08:26,400 --> 00:08:28,360 Speaker 2: these agree with each other. But this is a shit 118 00:08:28,400 --> 00:08:33,079 Speaker 2: show because part of the purpose of the Federal Reserve 119 00:08:33,679 --> 00:08:36,280 Speaker 2: is to be an entity that does research and distribute 120 00:08:36,280 --> 00:08:39,679 Speaker 2: information to the public, and its websites can't agree on 121 00:08:39,679 --> 00:08:42,840 Speaker 2: what it is now again, I'm being slightly pedantic here. 122 00:08:42,920 --> 00:08:46,120 Speaker 2: Technically both versions of this story, do you say that 123 00:08:46,320 --> 00:08:49,439 Speaker 2: this is both a public and a private entity? Sort 124 00:08:49,480 --> 00:08:53,520 Speaker 2: of now again, And this is a basic question about 125 00:08:53,520 --> 00:08:56,680 Speaker 2: the Federal Reserve. Is it a public or private entity? 126 00:08:57,320 --> 00:09:00,920 Speaker 2: And they can't agree on it. And this is, to 127 00:09:01,000 --> 00:09:04,640 Speaker 2: use a technical term, a fucking nightmare, because again, the 128 00:09:04,679 --> 00:09:07,800 Speaker 2: actual answer is that it is sort of both. The 129 00:09:07,840 --> 00:09:11,880 Speaker 2: banks themselves are like technically private, but they're run by 130 00:09:11,880 --> 00:09:14,760 Speaker 2: the Board of Governors, which is technically a government agency, 131 00:09:14,880 --> 00:09:18,920 Speaker 2: and they were established by the government. So tending to 132 00:09:18,960 --> 00:09:23,840 Speaker 2: sort out this colossal mess has inside of academia. This 133 00:09:23,880 --> 00:09:27,000 Speaker 2: has caused a change in the conception of what the 134 00:09:27,040 --> 00:09:32,760 Speaker 2: state is because what is this crap? So okay, let's 135 00:09:32,840 --> 00:09:38,640 Speaker 2: actually run through the structure of the Federal Reserve. So importantly, 136 00:09:38,679 --> 00:09:44,360 Speaker 2: the Federal Reserve is kind of three entities in a way. 137 00:09:44,400 --> 00:09:46,960 Speaker 2: You can think about this like the Holy Trinity. Right. 138 00:09:47,600 --> 00:09:51,439 Speaker 2: You have the twelve Federal Reserve banks, and those banks 139 00:09:51,559 --> 00:09:56,040 Speaker 2: are collectively managed by what are called governors who serve 140 00:09:56,120 --> 00:09:58,640 Speaker 2: on what is called the Board of Governors, which is 141 00:09:58,920 --> 00:10:02,679 Speaker 2: the second entity. And then there's also the Federal Open 142 00:10:02,720 --> 00:10:06,800 Speaker 2: Market Committee, which for our purposes, we don't care about 143 00:10:06,840 --> 00:10:10,160 Speaker 2: that much. But is composed of the seven members of 144 00:10:10,160 --> 00:10:12,280 Speaker 2: the Board of Governors, and this is the quote defend itself. 145 00:10:13,120 --> 00:10:15,560 Speaker 2: Is composed of the seven members of the Board of Governors, 146 00:10:15,559 --> 00:10:17,560 Speaker 2: the president of the Federal Reserve Bank of New York, 147 00:10:17,600 --> 00:10:20,120 Speaker 2: and four of the remaining eleven reserve bank presidents. You 148 00:10:20,240 --> 00:10:23,720 Speaker 2: serve one year terms on a rotating basis. So, okay, 149 00:10:23,800 --> 00:10:28,360 Speaker 2: we have three entities, right. We have the decentralized federal 150 00:10:28,440 --> 00:10:31,760 Speaker 2: Reserve banks, which there's twelve of them. They cover different 151 00:10:31,760 --> 00:10:35,320 Speaker 2: geographic regions of the country. We have the Board of Governors, 152 00:10:35,480 --> 00:10:38,600 Speaker 2: which oversees them. And the Board of Governors is the 153 00:10:38,640 --> 00:10:42,679 Speaker 2: part that is technically a government agency. And these governors 154 00:10:43,240 --> 00:10:48,120 Speaker 2: are importantly, for our purposes, nominated by the President and 155 00:10:48,360 --> 00:10:52,560 Speaker 2: confirmed by Congress. And this Board of Governors. The purpose 156 00:10:52,600 --> 00:10:56,360 Speaker 2: of this Board of Governors is to sort of run 157 00:10:56,840 --> 00:10:59,679 Speaker 2: all of it. Now they're running all of this at 158 00:10:59,720 --> 00:11:03,680 Speaker 2: a level. Each of those twelve federal Reserve banks also 159 00:11:03,679 --> 00:11:06,080 Speaker 2: have their own border directors and their own structures that 160 00:11:06,120 --> 00:11:10,960 Speaker 2: each run all of the different banks. So this is complicated. 161 00:11:11,200 --> 00:11:15,920 Speaker 2: And again, why talking about the Federal Reserve is so complicated? 162 00:11:16,280 --> 00:11:19,160 Speaker 2: If you just like start looking at political stuff people 163 00:11:19,200 --> 00:11:22,000 Speaker 2: have written about the Federal Reserve. It's a nightmare. Like 164 00:11:22,040 --> 00:11:24,880 Speaker 2: if you try to like do your own research, your 165 00:11:24,920 --> 00:11:27,800 Speaker 2: options are unless you know where to look, right, your 166 00:11:27,800 --> 00:11:30,360 Speaker 2: options are at the Federal Reserve itself, which is actually 167 00:11:31,120 --> 00:11:37,280 Speaker 2: not a terrible resource for the most part, because again, 168 00:11:37,880 --> 00:11:41,720 Speaker 2: conducting economic research is one of the points of the 169 00:11:41,760 --> 00:11:47,640 Speaker 2: Federal Reserve, but it's not ideal. And then also immediately 170 00:11:47,679 --> 00:11:50,320 Speaker 2: you get a bunch of very weird anti semitic conspiracy 171 00:11:50,360 --> 00:11:56,439 Speaker 2: theories about sound money and the sort of rand pall 172 00:11:56,720 --> 00:11:59,719 Speaker 2: people who want to eliminate the Federal Reserve because they're 173 00:12:00,120 --> 00:12:07,040 Speaker 2: mad at the US dollar not being based on gold. Nightmare, terrible, 174 00:12:07,200 --> 00:12:10,840 Speaker 2: zero out of ten. We absolutely hate it. Now, speaking 175 00:12:10,840 --> 00:12:13,600 Speaker 2: of things that we absolutely hate, it is not buying 176 00:12:13,800 --> 00:12:30,600 Speaker 2: these products and services. We are back. So, all right, 177 00:12:30,679 --> 00:12:33,760 Speaker 2: we've gone over the structure of the Federal Reserve. So 178 00:12:33,920 --> 00:12:36,719 Speaker 2: what does the Federal Reserve actually do? And why are 179 00:12:36,720 --> 00:12:40,800 Speaker 2: we talking about this at such length. If you know 180 00:12:41,000 --> 00:12:43,760 Speaker 2: one thing about the FED, it's that the FED can 181 00:12:43,800 --> 00:12:47,079 Speaker 2: print money. You may or may not remember the FED 182 00:12:47,160 --> 00:12:51,800 Speaker 2: printing money memes from twenty twenty in that sort of era, 183 00:12:52,800 --> 00:12:55,480 Speaker 2: and this is one of the conceptions of the FED. 184 00:12:55,559 --> 00:12:59,079 Speaker 2: That is true. The Federal Reserve is the entity given 185 00:12:59,200 --> 00:13:03,240 Speaker 2: power by the US government to print money. So when 186 00:13:03,760 --> 00:13:07,960 Speaker 2: dollar bills are created, the Treasury commissions the FED to 187 00:13:08,040 --> 00:13:12,400 Speaker 2: print the bills. Technically speaking, coins are stubmitted by the Treasury, 188 00:13:12,760 --> 00:13:16,880 Speaker 2: which is a whole side showed Tangent that I had 189 00:13:16,920 --> 00:13:18,800 Speaker 2: to cut out of this story because it's like twenty 190 00:13:18,800 --> 00:13:22,040 Speaker 2: minutes long. But you know, if you are holding a 191 00:13:22,120 --> 00:13:25,839 Speaker 2: US dollar, basically the odds are very very very very 192 00:13:25,960 --> 00:13:28,920 Speaker 2: very very very very good. The way you were holding 193 00:13:29,080 --> 00:13:33,120 Speaker 2: is technically a Federal Reserve. Note, Now what does that mean? 194 00:13:33,160 --> 00:13:35,200 Speaker 2: Be a what is happening here? Why is it the 195 00:13:35,240 --> 00:13:38,520 Speaker 2: government doesn't print money? Why is it this quasi private 196 00:13:38,679 --> 00:13:43,000 Speaker 2: public entity that's printing the money. Now, what's happening here 197 00:13:43,600 --> 00:13:48,280 Speaker 2: is slightly more complex than FED money printer. An American 198 00:13:48,400 --> 00:13:53,920 Speaker 2: dollar is US debt. Right, What you are holding in 199 00:13:53,960 --> 00:13:57,880 Speaker 2: your hands is a promise from the US government to 200 00:13:57,960 --> 00:14:01,320 Speaker 2: pay one dollar to the Federal l The Federal Reserve 201 00:14:01,640 --> 00:14:05,520 Speaker 2: is having this money distributed and is having this debt distributed. 202 00:14:05,600 --> 00:14:09,079 Speaker 2: And this is what US currency is. It is based 203 00:14:09,240 --> 00:14:13,040 Speaker 2: on debt held by In this case, the Federal Reserve 204 00:14:13,120 --> 00:14:16,120 Speaker 2: banks which have been given a monopoly to print this 205 00:14:16,240 --> 00:14:20,200 Speaker 2: debt as Federal Reserve notes, and the Federal Reserve can 206 00:14:20,400 --> 00:14:22,600 Speaker 2: just sort of create this. It's it's also worth noting that, 207 00:14:22,640 --> 00:14:24,440 Speaker 2: you know, when we talk about the FED creating money, 208 00:14:24,520 --> 00:14:27,680 Speaker 2: I mean obviously like it prints money for steff commissioned 209 00:14:27,680 --> 00:14:29,600 Speaker 2: by the Treasury, so you can have more bills in circulation. 210 00:14:29,680 --> 00:14:33,720 Speaker 2: But most of the actual money that's being created or 211 00:14:33,800 --> 00:14:36,760 Speaker 2: not created is you know, this is all happening digitally. 212 00:14:36,960 --> 00:14:41,240 Speaker 2: It is funds appearing in the bank accounts of the 213 00:14:41,280 --> 00:14:44,920 Speaker 2: banks that use the Federal Reserve. So the other thing 214 00:14:45,040 --> 00:14:49,480 Speaker 2: you may have heard about the FED is the FED 215 00:14:49,560 --> 00:14:52,640 Speaker 2: funds rate or what's called the FED interest rates, or 216 00:14:52,760 --> 00:14:54,520 Speaker 2: you know, you'll hear a bunch of talk about the 217 00:14:54,520 --> 00:14:58,320 Speaker 2: FED setting interest rates. So to understand what this is, 218 00:14:58,400 --> 00:15:00,680 Speaker 2: we need to kind of take aus step back and 219 00:15:00,720 --> 00:15:05,720 Speaker 2: look at what these banks actually are. The way this 220 00:15:05,800 --> 00:15:08,480 Speaker 2: is commonly described is that the FED is the bank 221 00:15:08,520 --> 00:15:11,480 Speaker 2: of banks, right, which is when a bank needs alone, 222 00:15:11,680 --> 00:15:14,000 Speaker 2: they go to the Federal Reserve, and banks put their 223 00:15:14,080 --> 00:15:16,280 Speaker 2: money in the Federal Reserve and they use it to 224 00:15:16,320 --> 00:15:20,960 Speaker 2: move their money around. That's true enough for our purposes. 225 00:15:21,560 --> 00:15:23,400 Speaker 2: I should also state here that a lot of what 226 00:15:23,480 --> 00:15:26,560 Speaker 2: I'm going to be saying this episode, particularly from here forward, 227 00:15:27,480 --> 00:15:33,600 Speaker 2: is technically probably a simplification of what's actually happening, because 228 00:15:34,440 --> 00:15:39,960 Speaker 2: the mechanisms here are very, very complicated. But okay, so 229 00:15:40,600 --> 00:15:43,240 Speaker 2: the FED interest rate, right, this is the thing that 230 00:15:43,360 --> 00:15:46,440 Speaker 2: is the source of all of the tension here. Right. 231 00:15:47,160 --> 00:15:50,800 Speaker 2: What Trump is pissed about to a large extent is 232 00:15:50,800 --> 00:15:54,400 Speaker 2: that he thinks that Fed interest rates are too high 233 00:15:54,440 --> 00:15:56,480 Speaker 2: and he wants them to be lower because he thinks 234 00:15:56,560 --> 00:15:59,960 Speaker 2: this will cause the economy to grow more. So, okay, 235 00:16:00,360 --> 00:16:03,000 Speaker 2: what does that mean is what is the FED interest rate? 236 00:16:03,760 --> 00:16:06,280 Speaker 2: The way this is explained to the public is that 237 00:16:06,320 --> 00:16:10,400 Speaker 2: the FED sets the cost of borrowing. That's like true, 238 00:16:10,880 --> 00:16:14,680 Speaker 2: kind of basically, there is a rate that is decided 239 00:16:14,720 --> 00:16:18,760 Speaker 2: on by the Federal Reserve Board. On a more technical level, though, 240 00:16:19,320 --> 00:16:23,200 Speaker 2: it's slightly more complicated than that. So when you hear 241 00:16:23,280 --> 00:16:27,280 Speaker 2: someone talk about the Fed's interest rate, what they are 242 00:16:27,320 --> 00:16:31,200 Speaker 2: talking about is the Federal funds rate. And technically what 243 00:16:31,200 --> 00:16:35,360 Speaker 2: they're talking about is the target Federal funds rate. So 244 00:16:35,560 --> 00:16:38,720 Speaker 2: I'm going to quote from the Federal Reserve self quote 245 00:16:39,320 --> 00:16:43,280 Speaker 2: the effective Federal funds rate is the interest rate at 246 00:16:43,280 --> 00:16:49,960 Speaker 2: which depository institutions, banks, savings institutions, thrifts, and credit unions 247 00:16:50,480 --> 00:16:54,720 Speaker 2: and government sponsored enterprises borrow from and lend to each 248 00:16:54,760 --> 00:16:59,320 Speaker 2: other overnight to meet short term business needs. The target 249 00:16:59,440 --> 00:17:02,320 Speaker 2: for the Federal funds rate, which is set by the 250 00:17:02,320 --> 00:17:06,520 Speaker 2: Federal Open Market Committee, has varied widely over the years 251 00:17:06,560 --> 00:17:10,239 Speaker 2: in response to prevailing economic conditions. So yeah, Also, by 252 00:17:10,280 --> 00:17:12,640 Speaker 2: the way, it is technically the Federal Open Market Committee 253 00:17:12,640 --> 00:17:16,560 Speaker 2: that sets the fund rate. But okay, when we're talking 254 00:17:16,600 --> 00:17:22,879 Speaker 2: about the FED setting the interest rates, right, there's kind 255 00:17:22,920 --> 00:17:28,640 Speaker 2: of two things going on. So the effective federal funds rate, 256 00:17:28,720 --> 00:17:31,639 Speaker 2: which is the thing that they're trying to control, is 257 00:17:31,680 --> 00:17:34,280 Speaker 2: the interest rate at which all of these different banks 258 00:17:34,280 --> 00:17:36,199 Speaker 2: that have their money in here are all using it 259 00:17:36,240 --> 00:17:39,320 Speaker 2: to lend to each other overnight. Through the money they 260 00:17:39,320 --> 00:17:41,840 Speaker 2: have the Federal reserve, they're all lending it to each other. 261 00:17:42,400 --> 00:17:45,440 Speaker 2: The average of the rate of interest that wistre lending 262 00:17:45,440 --> 00:17:48,439 Speaker 2: to each other overnight, the average of that rate is 263 00:17:48,440 --> 00:17:50,600 Speaker 2: the Federal funds rate. When people talk about like the 264 00:17:50,600 --> 00:17:52,959 Speaker 2: interest rates like three point two percent or whatever, what 265 00:17:53,000 --> 00:17:54,920 Speaker 2: the FED is trying to do is make sure that 266 00:17:55,040 --> 00:17:57,880 Speaker 2: at the end of the night. This effective federal funds rate, 267 00:17:57,960 --> 00:18:00,119 Speaker 2: which is the rate that all these banks will lending 268 00:18:00,160 --> 00:18:03,400 Speaker 2: each other money at, is at that rate. But they 269 00:18:03,400 --> 00:18:06,639 Speaker 2: don't actually technically directly have control of this, because it 270 00:18:06,680 --> 00:18:10,280 Speaker 2: is to be clear, the average rate of which all 271 00:18:10,320 --> 00:18:12,520 Speaker 2: of these banks are lending to each other. What the 272 00:18:12,560 --> 00:18:17,760 Speaker 2: FED is manipulating directly usually is the interest on reserve 273 00:18:17,840 --> 00:18:21,680 Speaker 2: balances or IRB. So this is the thing the FED 274 00:18:21,720 --> 00:18:24,840 Speaker 2: does control. The interest on reserve balances is how much 275 00:18:24,880 --> 00:18:27,040 Speaker 2: interest they pay out for just putting your money in 276 00:18:27,080 --> 00:18:29,240 Speaker 2: the FED and leaving it there. I'm going to quote 277 00:18:29,280 --> 00:18:33,119 Speaker 2: the FED again. The Fed's primary tool for influencing the 278 00:18:33,119 --> 00:18:36,320 Speaker 2: federal funds rate is the interest the FED pays on 279 00:18:36,440 --> 00:18:40,359 Speaker 2: funds that banks hold as reserve balances at their Federal 280 00:18:40,440 --> 00:18:44,160 Speaker 2: Reserve Bank, which is the interest on reserve balance's rate. 281 00:18:44,680 --> 00:18:47,840 Speaker 2: Because banks are unlikely to lend funds in the federal 282 00:18:47,880 --> 00:18:50,239 Speaker 2: funds market for less than they get paid on their 283 00:18:50,240 --> 00:18:53,879 Speaker 2: reserve balances at the Federal Reserve, the interest rate on 284 00:18:53,960 --> 00:18:56,800 Speaker 2: reserve balances is an effective tool for guiding the federal 285 00:18:56,840 --> 00:19:02,800 Speaker 2: funds rate. Okay, Mia, you've been spelled gibberish for many minutes. Now, 286 00:19:03,000 --> 00:19:06,359 Speaker 2: what the fuck does that mean. So what the FED 287 00:19:06,520 --> 00:19:09,320 Speaker 2: is normally doing is all right, So you put your 288 00:19:09,440 --> 00:19:11,439 Speaker 2: money in a bank, right, and that bank has an 289 00:19:11,480 --> 00:19:14,199 Speaker 2: interest rate, and it pays you out that amount of 290 00:19:14,240 --> 00:19:17,080 Speaker 2: interest at the end of the year, right, And that's 291 00:19:17,119 --> 00:19:19,720 Speaker 2: the money that you are making for putting your money 292 00:19:19,720 --> 00:19:24,080 Speaker 2: in this corporation. The FED also has their own interest 293 00:19:24,160 --> 00:19:26,959 Speaker 2: on reserve balances, so that they have their own interest 294 00:19:27,040 --> 00:19:29,199 Speaker 2: rate for how much money you can get from just 295 00:19:29,280 --> 00:19:33,840 Speaker 2: leaving your money in the Federal Reserve. And the theory, 296 00:19:33,880 --> 00:19:36,320 Speaker 2: and this is like you know true, is that banks 297 00:19:36,359 --> 00:19:39,080 Speaker 2: aren't going to lend each other money at interest rates 298 00:19:39,119 --> 00:19:44,080 Speaker 2: that are lower than what you can get from the FED, 299 00:19:44,119 --> 00:19:46,440 Speaker 2: because otherwise you just leave your money in the FED 300 00:19:46,960 --> 00:19:49,800 Speaker 2: and you get them out amount of money. So if 301 00:19:49,840 --> 00:19:54,159 Speaker 2: you're going to you know, loan someone something, right, the 302 00:19:54,160 --> 00:19:57,479 Speaker 2: interest that's being charged here is going to be higher 303 00:19:57,520 --> 00:19:59,480 Speaker 2: than the FED rate. And that's when we talk about 304 00:19:59,560 --> 00:20:02,960 Speaker 2: FED said interest rates. That's what's happening on a technical level, 305 00:20:03,720 --> 00:20:06,280 Speaker 2: and this is actually very important in the global economy 306 00:20:06,320 --> 00:20:09,240 Speaker 2: because what this does and this is where everything gets 307 00:20:09,280 --> 00:20:11,880 Speaker 2: extremely murky. And I'm going to go to a very 308 00:20:12,000 --> 00:20:15,520 Speaker 2: very high level of abstraction down from sort of the 309 00:20:15,960 --> 00:20:20,679 Speaker 2: very low technical details. Now, in theory, what this means is, 310 00:20:20,920 --> 00:20:23,399 Speaker 2: this is how easy it is to obtain money to 311 00:20:23,600 --> 00:20:27,280 Speaker 2: like invest in stuff. Right, this sets the rate at 312 00:20:27,320 --> 00:20:30,600 Speaker 2: which you can borrow money. And in theory, if you 313 00:20:30,640 --> 00:20:34,760 Speaker 2: have a very very low interest rate, right, if the 314 00:20:34,800 --> 00:20:37,760 Speaker 2: FED funds rate is really low, then is very very 315 00:20:37,880 --> 00:20:39,719 Speaker 2: cheap and easy to get a bunch of money, and 316 00:20:39,760 --> 00:20:42,399 Speaker 2: that money flows to the economy and theoretically that money 317 00:20:43,000 --> 00:20:46,439 Speaker 2: will you know, be used to invest in stuff and 318 00:20:46,480 --> 00:20:49,359 Speaker 2: that will increase economic growth. Okay, So why wouldn't the 319 00:20:49,359 --> 00:20:51,879 Speaker 2: FED rate just always be zero? And the answer to 320 00:20:51,880 --> 00:20:54,560 Speaker 2: that is that the FED, as an institution and this 321 00:20:54,760 --> 00:20:58,239 Speaker 2: is part of its legal framework that established it, is 322 00:20:58,320 --> 00:21:02,280 Speaker 2: also trying to control inflation. And the theory effectively is 323 00:21:02,320 --> 00:21:04,359 Speaker 2: that if you leave these things for too low for 324 00:21:04,440 --> 00:21:07,520 Speaker 2: too long, it will cause inflation, and it will cause 325 00:21:07,560 --> 00:21:11,480 Speaker 2: economic bubbles that are not actually supported by the return 326 00:21:11,520 --> 00:21:15,000 Speaker 2: on investment. Because if you can just always continuously borrow 327 00:21:15,119 --> 00:21:18,000 Speaker 2: money for zero dollars, then you can just invest in 328 00:21:18,040 --> 00:21:20,560 Speaker 2: anything as long as the return is like slightly more 329 00:21:20,600 --> 00:21:24,640 Speaker 2: than like nothing. However, Comma raising interest rates is used 330 00:21:24,680 --> 00:21:27,399 Speaker 2: as a way to try to slow economic growth in 331 00:21:27,520 --> 00:21:32,960 Speaker 2: order to not have inflation result, right, and also to 332 00:21:32,960 --> 00:21:36,760 Speaker 2: not have there be sort of speculative bubbles. And right 333 00:21:36,800 --> 00:21:39,080 Speaker 2: now we've entered a period in which interest rates have 334 00:21:39,119 --> 00:21:43,160 Speaker 2: been rising after a pretty prolonged period of interest rates 335 00:21:43,240 --> 00:21:45,919 Speaker 2: being effectively zero, like following the two thousand and eight 336 00:21:45,920 --> 00:21:48,840 Speaker 2: financial collapse. They've been really low for like a while 337 00:21:49,040 --> 00:21:51,159 Speaker 2: for some stuff in the nineties that we're going to 338 00:21:51,200 --> 00:21:54,160 Speaker 2: get you later. But this is basically the primary dispute, 339 00:21:54,320 --> 00:21:57,479 Speaker 2: which is that Okay, now, obviously the FED is to 340 00:21:57,480 --> 00:22:00,399 Speaker 2: some extent a political actor. But the question or is 341 00:22:00,760 --> 00:22:02,600 Speaker 2: who is going to get to set these sort of 342 00:22:02,640 --> 00:22:05,560 Speaker 2: interest rates? Right? Is it going to be the President 343 00:22:05,600 --> 00:22:08,320 Speaker 2: of the United States? Right? Is it going to be 344 00:22:08,359 --> 00:22:11,000 Speaker 2: that Donald Trump can just be like, oh, economy look bad, 345 00:22:11,160 --> 00:22:14,720 Speaker 2: turned down the interest rate? Or is it going to 346 00:22:14,760 --> 00:22:17,160 Speaker 2: be the Federal Reserve itself, which is how it presently 347 00:22:17,200 --> 00:22:22,639 Speaker 2: functions running this And that's what FED independence means. So 348 00:22:22,720 --> 00:22:27,280 Speaker 2: what is that stake? Here is one of the defining 349 00:22:28,080 --> 00:22:32,200 Speaker 2: the defining mechanisms of sort of economic control, of control 350 00:22:32,240 --> 00:22:34,280 Speaker 2: over the function of the economy. You know that this 351 00:22:34,359 --> 00:22:37,639 Speaker 2: is called like a macroeconomic policy lever Right, This is 352 00:22:38,160 --> 00:22:42,880 Speaker 2: one of the largest, most important and most powerful tools 353 00:22:42,920 --> 00:22:46,199 Speaker 2: that exists in the entire world economy for managing and 354 00:22:46,280 --> 00:22:50,479 Speaker 2: regulating the American economy. And the question is is this 355 00:22:50,520 --> 00:22:54,879 Speaker 2: going to remain with this sort of quasi technocratic, independent 356 00:22:55,040 --> 00:22:57,360 Speaker 2: staff or is it going to be directly set by 357 00:22:57,400 --> 00:23:01,399 Speaker 2: the presidents? And that is a huge fucking deal because, 358 00:23:01,440 --> 00:23:04,080 Speaker 2: as you mentioned last time I talked about this, there 359 00:23:04,119 --> 00:23:07,560 Speaker 2: have been times where presidents have gotten control over central banks. 360 00:23:07,800 --> 00:23:10,000 Speaker 2: For example, the sort of scare story that everyone is 361 00:23:10,000 --> 00:23:15,439 Speaker 2: talking about is Turkey where Airdwan, their effectively dictatorial leader, 362 00:23:15,880 --> 00:23:19,840 Speaker 2: managed to break the independence of his own central bank 363 00:23:20,040 --> 00:23:25,920 Speaker 2: and inflation rates are now merely forty percent. So this 364 00:23:25,960 --> 00:23:29,440 Speaker 2: is what's at stake. It's who gets to control this thing. 365 00:23:30,359 --> 00:23:33,760 Speaker 2: Is it Donald Trump or is it the Federal Reserve. 366 00:23:34,400 --> 00:23:35,960 Speaker 2: Now we are going to go to ads and we 367 00:23:36,000 --> 00:23:38,880 Speaker 2: are going to come back and talk a bit more 368 00:23:38,960 --> 00:23:53,040 Speaker 2: about some of the nightmares that can happen here. Now. Okay, 369 00:23:53,119 --> 00:23:55,240 Speaker 2: so we've been talking mostly about the Fed interest rate 370 00:23:55,280 --> 00:23:57,640 Speaker 2: because that is most of what it does. Well, that's 371 00:23:57,640 --> 00:24:00,520 Speaker 2: not most of what it does. That's the most important 372 00:24:00,640 --> 00:24:03,560 Speaker 2: thing that it does on a political level in terms 373 00:24:03,640 --> 00:24:09,119 Speaker 2: of you know, this is why Donald Trump wants it However, Comma, 374 00:24:09,320 --> 00:24:12,800 Speaker 2: the FED does a bunch of other shit, like, for example, 375 00:24:13,240 --> 00:24:15,879 Speaker 2: a whole bunch of the world's gold supply owned by 376 00:24:15,920 --> 00:24:17,920 Speaker 2: a bunch of countries across the world sits in a 377 00:24:18,040 --> 00:24:22,959 Speaker 2: vault under the Federal Reserve building. The FED has a 378 00:24:23,160 --> 00:24:27,360 Speaker 2: balance sheet right of like the assets that it owns, 379 00:24:27,400 --> 00:24:31,639 Speaker 2: and that balance sheet is right now about six and 380 00:24:31,680 --> 00:24:36,119 Speaker 2: a half trillion dollars. The payment system that the FED 381 00:24:36,200 --> 00:24:41,760 Speaker 2: maintains has two trillion dollars a day moving through it. 382 00:24:41,920 --> 00:24:45,639 Speaker 2: Right this payment infrastructure, the infrastructure of the Federal Reserve 383 00:24:46,119 --> 00:24:51,320 Speaker 2: is the core of the functioning of the entire American 384 00:24:51,400 --> 00:24:55,119 Speaker 2: banking system. Like I kind of emphasize this enough, and 385 00:24:55,200 --> 00:24:58,520 Speaker 2: this is also you know, important on a macro international level, right, 386 00:24:58,600 --> 00:25:04,440 Speaker 2: like this is functioning sort of normally. Is the difference 387 00:25:04,480 --> 00:25:08,280 Speaker 2: between capitalism working kind of normally, which is not good 388 00:25:08,359 --> 00:25:13,159 Speaker 2: but is working and did not working and Trump is 389 00:25:13,200 --> 00:25:16,240 Speaker 2: trying to take control of it. And again, this is 390 00:25:16,240 --> 00:25:19,479 Speaker 2: a guy who wants to invade Greenland, and she is 391 00:25:19,520 --> 00:25:22,800 Speaker 2: trying to take control over one of the most powerful 392 00:25:23,160 --> 00:25:28,160 Speaker 2: economic institutions that has ever existed in human history. So 393 00:25:28,600 --> 00:25:30,400 Speaker 2: these are the sort of the stakes of the fight 394 00:25:30,480 --> 00:25:32,840 Speaker 2: that's happening here, because again, the FED is supposed to 395 00:25:32,840 --> 00:25:36,680 Speaker 2: be an independent entity, right, The President is not supposed 396 00:25:36,680 --> 00:25:38,720 Speaker 2: to be able to order the FED to just do 397 00:25:38,880 --> 00:25:42,119 Speaker 2: whatever it wants. And this is what's at stake with 398 00:25:42,720 --> 00:25:45,920 Speaker 2: Trump trying to fire one of these Reserve Board presidents, 399 00:25:46,080 --> 00:25:50,080 Speaker 2: with Trump trying to prosecute the current head of the 400 00:25:50,080 --> 00:25:54,119 Speaker 2: Federal Reserve and use that threat to bring the FED 401 00:25:54,200 --> 00:25:57,240 Speaker 2: into line with doing what he wants to do. Now, 402 00:25:57,280 --> 00:26:00,440 Speaker 2: Trump is also again attempting to install him his own 403 00:26:00,520 --> 00:26:05,119 Speaker 2: guy when Jerome Powell's term as the chairman of the 404 00:26:05,119 --> 00:26:09,760 Speaker 2: Federal Reserve Board ends. And Okay, in terms of could 405 00:26:09,760 --> 00:26:14,480 Speaker 2: the Trump administration actually run this, right, I'm gonna read 406 00:26:14,520 --> 00:26:17,720 Speaker 2: this quote from actually a very good Yahoo story about 407 00:26:18,840 --> 00:26:22,720 Speaker 2: the search for Trump's knew who he wants to run 408 00:26:22,760 --> 00:26:26,440 Speaker 2: the Federal Reserve. This is starting with a quote from 409 00:26:26,680 --> 00:26:31,920 Speaker 2: Trump's Treasury Secretary Scott Bessett, Who's been the guy who 410 00:26:32,240 --> 00:26:36,480 Speaker 2: is running the candidate search quote, who can bring the 411 00:26:36,520 --> 00:26:39,920 Speaker 2: board along with them? Who has the gravitas, Bessett said, 412 00:26:40,520 --> 00:26:43,840 Speaker 2: who is going to have an open, green span like 413 00:26:44,000 --> 00:26:46,960 Speaker 2: mind that we could be going through a productivity boom 414 00:26:47,040 --> 00:26:49,920 Speaker 2: like we did in the nineties and not just throw 415 00:26:50,040 --> 00:26:54,640 Speaker 2: the brakes because we're alarmed at a high GDP number. Okay, 416 00:26:55,520 --> 00:26:59,960 Speaker 2: if you have spent your life closely following American mac 417 00:27:00,040 --> 00:27:06,520 Speaker 2: co economic policy, that is nuts. That is a terrifying statement, 418 00:27:07,440 --> 00:27:11,360 Speaker 2: utterly horrifying. Now, mil why is it scary to say 419 00:27:11,359 --> 00:27:13,760 Speaker 2: that he wants a green Span like mindset that doesn't 420 00:27:13,800 --> 00:27:16,879 Speaker 2: throw the brakes on the economy because they're alarmed by 421 00:27:16,920 --> 00:27:19,240 Speaker 2: a gdpeda. But why is that scary? And this is 422 00:27:19,240 --> 00:27:21,080 Speaker 2: also you know, why is it scary for the Trump 423 00:27:21,119 --> 00:27:23,600 Speaker 2: administration to have direct control of the Federal Reserve. Part 424 00:27:23,640 --> 00:27:25,800 Speaker 2: of the reason we haven't had a full scale economic 425 00:27:25,840 --> 00:27:28,840 Speaker 2: collapse in two thousand and eight has been that there 426 00:27:28,840 --> 00:27:33,360 Speaker 2: has been a bunch of very very careful management of 427 00:27:33,400 --> 00:27:36,240 Speaker 2: the economy by the Federal Reserve. Right, they have done 428 00:27:36,240 --> 00:27:39,040 Speaker 2: a lot of technical stuff. You know, I'm saying they've 429 00:27:39,080 --> 00:27:41,200 Speaker 2: done a lot of technical stuff. Well, when I say well, 430 00:27:41,320 --> 00:27:44,600 Speaker 2: I mean for the functioning of capital, like you and 431 00:27:44,640 --> 00:27:48,840 Speaker 2: me and everyone listening to this. Is it working for us? No, 432 00:27:49,320 --> 00:27:53,280 Speaker 2: not really, but it's working for capital, right, And they've 433 00:27:53,320 --> 00:27:55,880 Speaker 2: been able to prevent an economic collapse through a lot 434 00:27:55,920 --> 00:27:59,000 Speaker 2: of sort of technical means. In twenty twenty and you 435 00:27:59,040 --> 00:28:02,919 Speaker 2: see this now. They did these things called overnight repo injections, 436 00:28:02,920 --> 00:28:05,840 Speaker 2: where they would pump like one hundred billion dollars in 437 00:28:05,880 --> 00:28:09,479 Speaker 2: liquidity into the bank markets overnight in order to make 438 00:28:09,480 --> 00:28:11,240 Speaker 2: sure there was liquidity to because that was one of 439 00:28:11,240 --> 00:28:13,760 Speaker 2: the things that cost two thousand and eight collapse. So 440 00:28:14,040 --> 00:28:16,199 Speaker 2: they've been doing a bunch of very careful management, some 441 00:28:16,280 --> 00:28:18,640 Speaker 2: of it in these large swings that have very little 442 00:28:18,640 --> 00:28:21,600 Speaker 2: public attention, some of it in just the way they've 443 00:28:21,600 --> 00:28:25,360 Speaker 2: been doing policy. What these guys want to do is 444 00:28:25,400 --> 00:28:28,320 Speaker 2: the Greenspan stuff from the nineties. So, okay, Mia, what 445 00:28:28,359 --> 00:28:31,080 Speaker 2: the fuck is that? So what he's talking about is 446 00:28:31,119 --> 00:28:34,520 Speaker 2: the green Span put Now what happened to the nineties? 447 00:28:34,600 --> 00:28:37,200 Speaker 2: To simplify the story a little bit, but I'm not 448 00:28:37,240 --> 00:28:40,600 Speaker 2: even really simplifying it much. Every time the market went down, 449 00:28:41,240 --> 00:28:44,240 Speaker 2: green Span would just lower the interest rate to make 450 00:28:44,240 --> 00:28:47,200 Speaker 2: the market go back up. Right, So every single time 451 00:28:47,280 --> 00:28:49,600 Speaker 2: it even sort of looks like the market might be 452 00:28:49,680 --> 00:28:52,600 Speaker 2: going down, he makes the cost of borrowing from the 453 00:28:52,600 --> 00:28:54,840 Speaker 2: Fed cheaper, so you can just take more money out 454 00:28:54,880 --> 00:28:57,160 Speaker 2: of the Federal Reserve and plunge that money back into 455 00:28:57,160 --> 00:29:00,800 Speaker 2: the stock market. Right. That's the theory here. The economist 456 00:29:00,880 --> 00:29:03,280 Speaker 2: Robert Brenner called it asset Kanesianism. This is something we 457 00:29:03,320 --> 00:29:06,680 Speaker 2: have talked about on the show many, many, many times, 458 00:29:07,280 --> 00:29:10,520 Speaker 2: and it is to a large extent, the thing responsible 459 00:29:10,640 --> 00:29:13,680 Speaker 2: for the two thousand and eight economic collapse, and also 460 00:29:13,720 --> 00:29:18,080 Speaker 2: the dot com bo will before that, and arguably also 461 00:29:18,120 --> 00:29:21,760 Speaker 2: the Asian market collapses in the nineties. Okay, you know 462 00:29:21,840 --> 00:29:23,920 Speaker 2: you're you're dealing with a problem, which is that you 463 00:29:24,120 --> 00:29:27,960 Speaker 2: don't have a manufacturing economy that can support economic growth. 464 00:29:27,960 --> 00:29:30,200 Speaker 2: So what are you gonna do instead? Okay, we're gonna 465 00:29:30,200 --> 00:29:32,120 Speaker 2: give everyone a bunch of money so they can do 466 00:29:32,280 --> 00:29:34,720 Speaker 2: speculative investing in stocks. And we're gonna give him one 467 00:29:34,720 --> 00:29:37,440 Speaker 2: a bunch of money so that they can go invest 468 00:29:37,480 --> 00:29:39,800 Speaker 2: in the housing market because housing prices will only ever 469 00:29:39,880 --> 00:29:43,400 Speaker 2: go up, and that's the thing that these people want 470 00:29:43,440 --> 00:29:46,720 Speaker 2: to do. Right And in terms of why, okay, why 471 00:29:46,720 --> 00:29:48,960 Speaker 2: should you be scared about this? Right? This is like 472 00:29:49,600 --> 00:29:52,280 Speaker 2: saying that, Okay, we need to bring back the guys 473 00:29:52,320 --> 00:29:55,760 Speaker 2: who did all of the like mortgage backed securities in 474 00:29:55,760 --> 00:29:58,040 Speaker 2: two thousand and eight that went up and put them 475 00:29:58,040 --> 00:30:00,880 Speaker 2: in charge of like the world's most powerful economic institution. 476 00:30:02,200 --> 00:30:05,800 Speaker 2: So the candidates that Trump is talking about putting in place, 477 00:30:06,560 --> 00:30:08,400 Speaker 2: I don't know if any of them are going to 478 00:30:08,520 --> 00:30:10,520 Speaker 2: make it right now, because I think the kind of 479 00:30:10,560 --> 00:30:12,360 Speaker 2: person Trump is looking for is not the kind of 480 00:30:12,360 --> 00:30:16,520 Speaker 2: person who like runs this kind of thing normally. In 481 00:30:16,600 --> 00:30:19,280 Speaker 2: terms of like what Trump would do with the guy 482 00:30:19,360 --> 00:30:22,720 Speaker 2: that he sort of installed there, we can look at 483 00:30:22,880 --> 00:30:27,120 Speaker 2: who they've already installed, right And the one Federal Reserve 484 00:30:27,160 --> 00:30:31,240 Speaker 2: Board member that Trump has successfully gotten in place is 485 00:30:31,280 --> 00:30:34,560 Speaker 2: Stephan Miren, who, and I kind of emphasizes enough, I 486 00:30:34,600 --> 00:30:36,920 Speaker 2: talk about how nuts this guy is all the time. 487 00:30:37,320 --> 00:30:40,320 Speaker 2: This is the guy who wants other countries to pay 488 00:30:40,400 --> 00:30:43,959 Speaker 2: taxes on holding US bonds, And this is the guy that, 489 00:30:44,080 --> 00:30:45,920 Speaker 2: again is now one of the governors of the Federal 490 00:30:45,960 --> 00:30:48,280 Speaker 2: Reserve Board because Trump put him there. I could spend 491 00:30:48,320 --> 00:30:51,280 Speaker 2: another forty minutes ranting about how bad of an idea 492 00:30:51,400 --> 00:30:53,800 Speaker 2: his Mara Lago Accords, which is his version of the 493 00:30:53,800 --> 00:30:57,960 Speaker 2: Plaza Chords, would be. It's gibberish, it's atrocious, and these 494 00:30:58,040 --> 00:31:03,800 Speaker 2: people are simple, not good enough at technical economic management 495 00:31:03,840 --> 00:31:07,040 Speaker 2: to be put in charge of the Federal Reserve, the 496 00:31:07,080 --> 00:31:10,520 Speaker 2: most powerful economic agency in the entire world. And again, 497 00:31:10,800 --> 00:31:13,520 Speaker 2: as I've been saying, right, this economic management has been 498 00:31:13,560 --> 00:31:17,840 Speaker 2: good for capital. Has it been good for us? Like? No, 499 00:31:18,320 --> 00:31:23,840 Speaker 2: not really. However, COMMA putting that power directly into the 500 00:31:23,920 --> 00:31:27,920 Speaker 2: hands of Donald Trump is an even worse idea. But 501 00:31:28,000 --> 00:31:30,040 Speaker 2: it's also very important that this has been good for 502 00:31:30,120 --> 00:31:33,760 Speaker 2: capital because FED independence is the red line for a 503 00:31:34,040 --> 00:31:37,880 Speaker 2: lot of very very powerful sectors of capital who would 504 00:31:37,960 --> 00:31:39,920 Speaker 2: be fine with things like like you could, like Trump 505 00:31:39,960 --> 00:31:43,440 Speaker 2: could do public executions in the streets, and like GP 506 00:31:43,560 --> 00:31:47,160 Speaker 2: Morgan eventually would be okay with it. Right, JP Morgan 507 00:31:47,280 --> 00:31:51,640 Speaker 2: is like panicking over this Federal Reserve stuff. So this 508 00:31:51,720 --> 00:31:54,600 Speaker 2: is actually a line at which segments of capital are 509 00:31:54,600 --> 00:31:58,640 Speaker 2: willing to break with Trump because this is an existential 510 00:31:58,640 --> 00:32:01,800 Speaker 2: threat to them. Now, before I sort of close this out, 511 00:32:02,520 --> 00:32:06,880 Speaker 2: I've been giving what is essentially a very conventional analysis 512 00:32:06,920 --> 00:32:09,360 Speaker 2: of what the Federal Reserve is, because to some extent 513 00:32:09,360 --> 00:32:11,600 Speaker 2: you need a conventional analysis of what the Federal Reserve 514 00:32:11,840 --> 00:32:16,000 Speaker 2: is to understand what the fuck is going on with 515 00:32:16,200 --> 00:32:19,280 Speaker 2: these board things. But I want to give the final 516 00:32:19,320 --> 00:32:22,360 Speaker 2: word to the anthropologist David Raper. This is from his 517 00:32:22,400 --> 00:32:27,640 Speaker 2: book Debt the First five thousand Years. Quote one element, however, 518 00:32:27,800 --> 00:32:31,400 Speaker 2: tends to go flagrantly missing in even the most vivid 519 00:32:31,440 --> 00:32:35,600 Speaker 2: conspiracy theories about the banking system, let alone in official accounts. 520 00:32:36,040 --> 00:32:40,160 Speaker 2: That is the role of war and military power. There's 521 00:32:40,200 --> 00:32:43,120 Speaker 2: a reason why the wizard has such a strange capacity 522 00:32:43,120 --> 00:32:46,640 Speaker 2: to make money out of nothing. Behind him, there is 523 00:32:46,680 --> 00:32:50,800 Speaker 2: a man with a gun. True in one sense, he's 524 00:32:50,840 --> 00:32:54,200 Speaker 2: been there from the start. I have already pointed out 525 00:32:54,280 --> 00:32:57,080 Speaker 2: that modern money is based on government debt, and that 526 00:32:57,120 --> 00:33:01,120 Speaker 2: governments borrow money in order to finance wars. This is 527 00:33:01,480 --> 00:33:03,960 Speaker 2: just as true today as it was in the age 528 00:33:03,960 --> 00:33:07,520 Speaker 2: of King Philip the Second. The creation of central banks 529 00:33:07,560 --> 00:33:12,200 Speaker 2: represented a permanent institutionalization of that marriage between the interests 530 00:33:12,200 --> 00:33:16,120 Speaker 2: of warriors and financiers that had already begun to emerge 531 00:33:16,120 --> 00:33:19,840 Speaker 2: in Renaissance Italy, and that eventually became the foundation of 532 00:33:19,920 --> 00:33:24,520 Speaker 2: financial capitalism. And this is something that's very very important. 533 00:33:24,600 --> 00:33:27,440 Speaker 2: Right We've been talking about how important the FED is 534 00:33:27,520 --> 00:33:31,000 Speaker 2: as an economic institution, and obviously the importance of the 535 00:33:31,000 --> 00:33:33,880 Speaker 2: Federal Reserve is tied in with the fact that the 536 00:33:33,960 --> 00:33:36,720 Speaker 2: dollar is the world's reserve currency, which makes it the 537 00:33:36,800 --> 00:33:40,240 Speaker 2: most important currency on Earth. It means that every other 538 00:33:40,360 --> 00:33:44,920 Speaker 2: country is doing a bunch of transactions denominated in American dollars, 539 00:33:44,920 --> 00:33:46,960 Speaker 2: and it turns out when you can make American dollars 540 00:33:46,960 --> 00:33:50,000 Speaker 2: that is an enormous advantage for you. But this is 541 00:33:50,200 --> 00:33:54,600 Speaker 2: all based on American military power. Right. The reason that 542 00:33:54,680 --> 00:33:57,160 Speaker 2: the dollar is the world reserve currency is because all 543 00:33:57,240 --> 00:34:00,440 Speaker 2: of the countries that had competing currencies that could have 544 00:34:00,440 --> 00:34:02,880 Speaker 2: been the international standard were sort of annihilated during World 545 00:34:02,880 --> 00:34:04,760 Speaker 2: War Two. And at the end of World War Two, 546 00:34:04,800 --> 00:34:08,160 Speaker 2: it was the United States left standing with the richest 547 00:34:08,160 --> 00:34:12,080 Speaker 2: and most powerful economy on Earth, yes, but also like 548 00:34:12,560 --> 00:34:16,320 Speaker 2: it was the country with nukes and the largest army 549 00:34:16,400 --> 00:34:19,480 Speaker 2: that wasn't the Soviets. Right. The element here that that 550 00:34:19,560 --> 00:34:21,799 Speaker 2: Graber is pointing out right is that the debt that 551 00:34:22,160 --> 00:34:24,359 Speaker 2: you and me and everyone is like carrying out our 552 00:34:24,960 --> 00:34:29,759 Speaker 2: day to day stuff with is war debt. Literally the 553 00:34:29,800 --> 00:34:33,160 Speaker 2: thing that we used to like buy groceries is to 554 00:34:33,200 --> 00:34:36,560 Speaker 2: a large extent, it's a tiny bit more complicated than this, 555 00:34:36,760 --> 00:34:39,080 Speaker 2: but like it's loads that were taken out to like 556 00:34:39,320 --> 00:34:43,759 Speaker 2: go bomb Vietnam. And part of what's happening under the 557 00:34:43,800 --> 00:34:47,680 Speaker 2: Trump administration is that all of the things that used 558 00:34:47,680 --> 00:34:52,120 Speaker 2: to be under the table, right, the US, you know, 559 00:34:52,520 --> 00:34:55,480 Speaker 2: always had the kind of military power that Trump is 560 00:34:55,520 --> 00:34:57,760 Speaker 2: sort of throwing around to try to, you know, invade 561 00:34:57,760 --> 00:35:00,920 Speaker 2: Greenland or just kidnap the president of Venezuela and like 562 00:35:01,000 --> 00:35:04,439 Speaker 2: run the country by gunboat. The US has always had 563 00:35:04,480 --> 00:35:07,520 Speaker 2: the ability to do this, It's just that it was 564 00:35:07,680 --> 00:35:11,640 Speaker 2: largely agreed upon by everyone involved running the system that 565 00:35:11,760 --> 00:35:14,239 Speaker 2: using this power under the table was more effective than 566 00:35:14,320 --> 00:35:17,400 Speaker 2: using it openly. The Trump administration thinks that, you know, 567 00:35:17,920 --> 00:35:22,200 Speaker 2: using soft power or not explicitly, just like saying we're 568 00:35:22,200 --> 00:35:26,000 Speaker 2: going to invade you is like womanly pussy cook shit, 569 00:35:26,280 --> 00:35:29,680 Speaker 2: Like that's effectively what's happening here is and these people 570 00:35:29,719 --> 00:35:32,040 Speaker 2: think that these relationships need to be drawn out into 571 00:35:32,080 --> 00:35:36,120 Speaker 2: the open right. And so what we're left with here 572 00:35:36,960 --> 00:35:40,719 Speaker 2: is a war between two sectors of capital, one of 573 00:35:40,760 --> 00:35:43,360 Speaker 2: which wants to immolate the world to satisfy the ego 574 00:35:43,400 --> 00:35:46,759 Speaker 2: of a tyrant, and the other of which wants to 575 00:35:46,880 --> 00:35:51,640 Speaker 2: let climate chains immolate the world slightly slower, because doing 576 00:35:51,640 --> 00:35:54,120 Speaker 2: anything about climate change would hurt the bottom line, but 577 00:35:54,160 --> 00:35:58,000 Speaker 2: allowing the god king to immolate the world by himself 578 00:35:58,080 --> 00:36:02,000 Speaker 2: would hurt their bottom line too. And this is effectively 579 00:36:02,840 --> 00:36:06,560 Speaker 2: the problem with the moment that they're in, which is 580 00:36:06,560 --> 00:36:10,880 Speaker 2: that neither of these institutions. Right, Donald Trump is not 581 00:36:10,920 --> 00:36:12,799 Speaker 2: on your side. The Federal Reserve is also not on 582 00:36:12,840 --> 00:36:17,759 Speaker 2: your side. What is necessary here, though, is not for 583 00:36:18,160 --> 00:36:22,200 Speaker 2: sort of comrade Federal Reserve to join us. What is 584 00:36:22,280 --> 00:36:27,400 Speaker 2: necessary here for our purposes is that enough sectors of 585 00:36:27,440 --> 00:36:31,800 Speaker 2: capital when the time comes, right, when Trump finally does something, 586 00:36:32,120 --> 00:36:34,600 Speaker 2: and when there's a popular reaction enough that forces a 587 00:36:34,600 --> 00:36:40,000 Speaker 2: confrontration between Trump and the American people. When that time comes, 588 00:36:40,800 --> 00:36:45,040 Speaker 2: what is necessary is that these massive and powerful economic 589 00:36:45,080 --> 00:36:50,480 Speaker 2: institutions stand aside and not defend the regime. As I've 590 00:36:50,520 --> 00:36:53,600 Speaker 2: talked about to a significant extent on this podcast already. 591 00:36:53,640 --> 00:36:56,520 Speaker 2: This is how the Bolsheviks won their revolution. It's also 592 00:36:56,520 --> 00:36:59,919 Speaker 2: how the February Revolution won, which was that large poor 593 00:37:00,920 --> 00:37:04,759 Speaker 2: of the populace, large portions of the ruling class, and 594 00:37:04,880 --> 00:37:07,319 Speaker 2: to some extent, large portions of the state simply set 595 00:37:07,360 --> 00:37:11,279 Speaker 2: the conflict out because they didn't particularly like the revolutionaries. 596 00:37:11,320 --> 00:37:14,160 Speaker 2: But they also weren't going to go die for some 597 00:37:14,400 --> 00:37:19,840 Speaker 2: random tyrant, and that, in the end is what's important 598 00:37:19,880 --> 00:37:22,640 Speaker 2: about this conflict. Right. There is, on the one hand, 599 00:37:22,719 --> 00:37:26,320 Speaker 2: the possibility of Donald Trump just immilating the entire economy, 600 00:37:26,719 --> 00:37:29,359 Speaker 2: and on the other there is the possibility of these 601 00:37:29,400 --> 00:37:32,560 Speaker 2: people standing aside when we attempt to build a world, 602 00:37:33,400 --> 00:37:35,760 Speaker 2: when we are not being lit on fire for profit. 603 00:37:37,200 --> 00:37:39,160 Speaker 2: This has been It could Happen Here. 604 00:37:42,480 --> 00:37:44,960 Speaker 1: It could Happen Here is a production of cool Zone Media. 605 00:37:45,160 --> 00:37:48,200 Speaker 1: For more podcasts from cool Zone Media, visit our website 606 00:37:48,280 --> 00:37:50,840 Speaker 1: cool Zonemedia dot com, or check us out on the 607 00:37:50,880 --> 00:37:53,919 Speaker 1: iHeartRadio app, Apple Podcasts, or wherever. 608 00:37:53,640 --> 00:37:54,839 Speaker 2: You listen to podcasts. 609 00:37:55,239 --> 00:37:57,200 Speaker 1: You can now find sources for it could Happen Here 610 00:37:57,200 --> 00:37:59,959 Speaker 1: listed directly in episode descriptions. Thanks for listening. 611 00:38:00,000 --> 00:38:00,200 Speaker 2: Thank