Speaker 1: Call Zone Media.
Speaker 2: Welcome to it could Happen here, a podcast about which
Speaker 2: calamity this country and many others are going through. This week,
Speaker 2: I am your host, Mia Wong, and today we are
Speaker 2: going to be talking about the Federal Reserve. Now, those
Speaker 2: of you who have listened to Executive Disorder are aware
Speaker 2: that a bit over a week ago, as this episode
Speaker 2: is being released, Federal Reserve Chairman jirom Age Powell released
Speaker 2: what again I can really only describe as someone escaping
Speaker 2: from a kidnapping and releasing a video about it in
Speaker 2: which he discussed a Justice Department grand jury sabina and
Speaker 2: a threat to indict him over cost overruns on a
Speaker 2: new fe Federal Reserve building. Now, Jerome Powell has claimed
Speaker 2: that these charges are really about removing him and about
Speaker 2: eliminating the independence of the Federal Reserve. He also claims
Speaker 2: that he was directly threatened with these charges unless he
Speaker 2: was willing to adjust the Federal Reserve policy to fall
Speaker 2: in line with the Trump administration. And this is an
Speaker 2: astonishing video for a number of reasons. One is that
Speaker 2: it's in a lot of ways one of the most
Speaker 2: direct points of defiance that a government official has taken
Speaker 2: directly to the presidents. It's also astonishing because it is
Speaker 2: actually technically the second time that Trump has tried to
Speaker 2: do something like this to a member of the Federal
Speaker 2: Reserve Board. Because as you're listening to this, the Supreme
Speaker 2: Court has been hearing arguments about Trump's attempt to fire
Speaker 2: one of the other members of the Federal Reserve Board,
Speaker 2: a woman named Lisa Cook. Now, obviously I don't know
Speaker 2: yet what the outcome of that deliberation is going to be.
Speaker 2: It seems right now that the Supreme Court is uncompelled
Speaker 2: with Trump's ability to fire a Federal Reserve Board member
Speaker 2: over really truly very trumped up charges about mortgage fraud.
Speaker 2: I'm going to quote here from the Supreme Court in
Speaker 2: what has become a very important statement. Quote, the Federal
Speaker 2: Reserve is a uniquely structured, quasi private entity that follows
Speaker 2: in the distinct tradition of the First and Second Banks
Speaker 2: of the United States. Importance of this statement is that
Speaker 2: the Supreme Court has been willing to allow Trump to
Speaker 2: fire the heads of other you know, what are supposed
Speaker 2: to be independent entities, right, or fire members of what
Speaker 2: are supposed to be independent federal agencies. He's been able
Speaker 2: to just completely illegally, by the way, but with the
Speaker 2: approval the Supreme Court been able to fire a lot
Speaker 2: of people who were appointed under the Biden administration to
Speaker 2: posts in independent regulatory agencies. However, so far the Supreme
Speaker 2: Court has balked at doing this for the Federal Reserve. Now,
Speaker 2: why is that and why is this entire thing so important?
Speaker 2: To understand that question and to understand why I've spent
Speaker 2: so much time talking about what in the grand scheme
Speaker 2: of things seems like a kind of minor, you know,
Speaker 2: just like another example of Trump attempting to use the
Speaker 2: judiciary and investigations to go after his political enemies. We
Speaker 2: need to talk about what the Federal Reserve is and
Speaker 2: what it does, because this is ourguably the central institution
Speaker 2: of global capitalism and its importance in maintaining the global
Speaker 2: capitalist economy is to a large extent. The reason why
Speaker 2: this is the point at which US senators, who are
Speaker 2: aligned with Trump on every other issue have actively taken
Speaker 2: a stand against this sort of prosecution of Jerome Powell
Speaker 2: is why the Supreme Court seems to not be interested
Speaker 2: in allowing Trump to wield the executive power. And this
Speaker 2: is because fucking with the Federal Reserve is fucking with
Speaker 2: the money. So what is the Federal Reserve? The Federal Reserve,
Speaker 2: to put it mildly, is an extremely confusing entity. So
Speaker 2: if you remember back to a few minutes ago when
Speaker 2: I said that the Supreme Court said that the Federal
Speaker 2: Reserve is a uniquely structured quasi private entity, we could
Speaker 2: ask the question, Okay, so it's a quasi private entity.
Speaker 2: Is it a public entity? Or is it a private entity?
Speaker 2: This is a relatively simple question. Here is the answer
Speaker 2: provided by the Saint Louis Federal Reserve's website quote. The
Speaker 2: Federal Reserve Banks are not a part of the federal government,
Speaker 2: but they exist because of an Act of Congress. Their
Speaker 2: purpose is to serve the public. So is the FED
Speaker 2: private or public? The answer is both. While the Board
Speaker 2: of Governors is an independent government agency, the Federal Reserve
Speaker 2: Banks are set up like private corporations. Member banks hold
Speaker 2: stock in the Federal Reserve and earn dividends. Holding this
Speaker 2: stock does not carry with it the control and financial
Speaker 2: interests given to holders of common stock and for profit organizations.
Speaker 2: The stock may not be sold or pleasures collateral for loans. Okay,
Speaker 2: So here's the Federal Reserve's answer to is it a
Speaker 2: public or private entity? Is both. The Board of Governors
Speaker 2: is an independent agency. The Federal Reserve banks are set
Speaker 2: up like private corporations. So it's sort of both. Okay,
Speaker 2: question settled, it's both. We can move on. Wait, hold on,
Speaker 2: I am receiving word that the Federal Reserve has comments
Speaker 2: on this idea. Hold on, hold on, let me, let me.
Speaker 2: Let me turn to the Federal Reserve, the National Federal
Speaker 2: Reserves website, which has a comment on the idea that
Speaker 2: the Federal Reserve banks or private entities. Okay, here we go,
Speaker 2: Here we go quoting them. Now, some observers mistakenly consider
Speaker 2: the Federal Reserve to be a private entity because the
Speaker 2: Reserve banks are organized similar to private corporations. For instance,
Speaker 2: each of the twelve reserve banks operates within its own
Speaker 2: particular geographic area or district of the United States, and
Speaker 2: each is incorporated, is separately incorporated and has its own
Speaker 2: board of directors. Commercial banks that are members of the
Speaker 2: Federal Reserve system hold stock in their district's reserve bank. Now, okay,
Speaker 2: let's look at what we have here. These are two
Speaker 2: different websites run by two different parts of the Federal Reserve,
Speaker 2: one of which says that the Federal Reserve Banks are
Speaker 2: not part of the of the federal government, but they
Speaker 2: exist because of an Act of Congress. So is the
Speaker 2: Fed public or private? The answer is both, because the
Speaker 2: Federal Reserve banks are set up like private corporations. That's
Speaker 2: the Saint Louis are Reserve. Now, the National Federal Reserve
Speaker 2: says quote, some observers mistakenly consider the Federal Reserve to
Speaker 2: be a private entity because the reserve banks are organized
Speaker 2: similar leader private corporations. So you can see that we
Speaker 2: are dealing here with an absolute goddamn mess because if
Speaker 2: you read the two websites of different federal versions of
Speaker 2: the Federal Reserve, National and sort of branches of the
Speaker 2: Federal Reserve, they say different things about what it is,
Speaker 2: and they sound like they're arguing each other. Now, Okay,
Speaker 2: I am doing this because it's funny. Technically both of
Speaker 2: these agree with each other. But this is a shit
Speaker 2: show because part of the purpose of the Federal Reserve
Speaker 2: is to be an entity that does research and distribute
Speaker 2: information to the public, and its websites can't agree on
Speaker 2: what it is now again, I'm being slightly pedantic here.
Speaker 2: Technically both versions of this story, do you say that
Speaker 2: this is both a public and a private entity? Sort
Speaker 2: of now again, And this is a basic question about
Speaker 2: the Federal Reserve. Is it a public or private entity?
Speaker 2: And they can't agree on it. And this is, to
Speaker 2: use a technical term, a fucking nightmare, because again, the
Speaker 2: actual answer is that it is sort of both. The
Speaker 2: banks themselves are like technically private, but they're run by
Speaker 2: the Board of Governors, which is technically a government agency,
Speaker 2: and they were established by the government. So tending to
Speaker 2: sort out this colossal mess has inside of academia. This
Speaker 2: has caused a change in the conception of what the
Speaker 2: state is because what is this crap? So okay, let's
Speaker 2: actually run through the structure of the Federal Reserve. So importantly,
Speaker 2: the Federal Reserve is kind of three entities in a way.
Speaker 2: You can think about this like the Holy Trinity. Right.
Speaker 2: You have the twelve Federal Reserve banks, and those banks
Speaker 2: are collectively managed by what are called governors who serve
Speaker 2: on what is called the Board of Governors, which is
Speaker 2: the second entity. And then there's also the Federal Open
Speaker 2: Market Committee, which for our purposes, we don't care about
Speaker 2: that much. But is composed of the seven members of
Speaker 2: the Board of Governors, and this is the quote defend itself.
Speaker 2: Is composed of the seven members of the Board of Governors,
Speaker 2: the president of the Federal Reserve Bank of New York,
Speaker 2: and four of the remaining eleven reserve bank presidents. You
Speaker 2: serve one year terms on a rotating basis. So, okay,
Speaker 2: we have three entities, right. We have the decentralized federal
Speaker 2: Reserve banks, which there's twelve of them. They cover different
Speaker 2: geographic regions of the country. We have the Board of Governors,
Speaker 2: which oversees them. And the Board of Governors is the
Speaker 2: part that is technically a government agency. And these governors
Speaker 2: are importantly, for our purposes, nominated by the President and
Speaker 2: confirmed by Congress. And this Board of Governors. The purpose
Speaker 2: of this Board of Governors is to sort of run
Speaker 2: all of it. Now they're running all of this at
Speaker 2: a level. Each of those twelve federal Reserve banks also
Speaker 2: have their own border directors and their own structures that
Speaker 2: each run all of the different banks. So this is complicated.
Speaker 2: And again, why talking about the Federal Reserve is so complicated?
Speaker 2: If you just like start looking at political stuff people
Speaker 2: have written about the Federal Reserve. It's a nightmare. Like
Speaker 2: if you try to like do your own research, your
Speaker 2: options are unless you know where to look, right, your
Speaker 2: options are at the Federal Reserve itself, which is actually
Speaker 2: not a terrible resource for the most part, because again,
Speaker 2: conducting economic research is one of the points of the
Speaker 2: Federal Reserve, but it's not ideal. And then also immediately
Speaker 2: you get a bunch of very weird anti semitic conspiracy
Speaker 2: theories about sound money and the sort of rand pall
Speaker 2: people who want to eliminate the Federal Reserve because they're
Speaker 2: mad at the US dollar not being based on gold. Nightmare, terrible,
Speaker 2: zero out of ten. We absolutely hate it. Now, speaking
Speaker 2: of things that we absolutely hate, it is not buying
Speaker 2: these products and services. We are back. So, all right,
Speaker 2: we've gone over the structure of the Federal Reserve. So
Speaker 2: what does the Federal Reserve actually do? And why are
Speaker 2: we talking about this at such length. If you know
Speaker 2: one thing about the FED, it's that the FED can
Speaker 2: print money. You may or may not remember the FED
Speaker 2: printing money memes from twenty twenty in that sort of era,
Speaker 2: and this is one of the conceptions of the FED.
Speaker 2: That is true. The Federal Reserve is the entity given
Speaker 2: power by the US government to print money. So when
Speaker 2: dollar bills are created, the Treasury commissions the FED to
Speaker 2: print the bills. Technically speaking, coins are stubmitted by the Treasury,
Speaker 2: which is a whole side showed Tangent that I had
Speaker 2: to cut out of this story because it's like twenty
Speaker 2: minutes long. But you know, if you are holding a
Speaker 2: US dollar, basically the odds are very very very very
Speaker 2: very very very very good. The way you were holding
Speaker 2: is technically a Federal Reserve. Note, Now what does that mean?
Speaker 2: Be a what is happening here? Why is it the
Speaker 2: government doesn't print money? Why is it this quasi private
Speaker 2: public entity that's printing the money. Now, what's happening here
Speaker 2: is slightly more complex than FED money printer. An American
Speaker 2: dollar is US debt. Right, What you are holding in
Speaker 2: your hands is a promise from the US government to
Speaker 2: pay one dollar to the Federal l The Federal Reserve
Speaker 2: is having this money distributed and is having this debt distributed.
Speaker 2: And this is what US currency is. It is based
Speaker 2: on debt held by In this case, the Federal Reserve
Speaker 2: banks which have been given a monopoly to print this
Speaker 2: debt as Federal Reserve notes, and the Federal Reserve can
Speaker 2: just sort of create this. It's it's also worth noting that,
Speaker 2: you know, when we talk about the FED creating money,
Speaker 2: I mean obviously like it prints money for steff commissioned
Speaker 2: by the Treasury, so you can have more bills in circulation.
Speaker 2: But most of the actual money that's being created or
Speaker 2: not created is you know, this is all happening digitally.
Speaker 2: It is funds appearing in the bank accounts of the
Speaker 2: banks that use the Federal Reserve. So the other thing
Speaker 2: you may have heard about the FED is the FED
Speaker 2: funds rate or what's called the FED interest rates, or
Speaker 2: you know, you'll hear a bunch of talk about the
Speaker 2: FED setting interest rates. So to understand what this is,
Speaker 2: we need to kind of take aus step back and
Speaker 2: look at what these banks actually are. The way this
Speaker 2: is commonly described is that the FED is the bank
Speaker 2: of banks, right, which is when a bank needs alone,
Speaker 2: they go to the Federal Reserve, and banks put their
Speaker 2: money in the Federal Reserve and they use it to
Speaker 2: move their money around. That's true enough for our purposes.
Speaker 2: I should also state here that a lot of what
Speaker 2: I'm going to be saying this episode, particularly from here forward,
Speaker 2: is technically probably a simplification of what's actually happening, because
Speaker 2: the mechanisms here are very, very complicated. But okay, so
Speaker 2: the FED interest rate, right, this is the thing that
Speaker 2: is the source of all of the tension here. Right.
Speaker 2: What Trump is pissed about to a large extent is
Speaker 2: that he thinks that Fed interest rates are too high
Speaker 2: and he wants them to be lower because he thinks
Speaker 2: this will cause the economy to grow more. So, okay,
Speaker 2: what does that mean is what is the FED interest rate?
Speaker 2: The way this is explained to the public is that
Speaker 2: the FED sets the cost of borrowing. That's like true,
Speaker 2: kind of basically, there is a rate that is decided
Speaker 2: on by the Federal Reserve Board. On a more technical level, though,
Speaker 2: it's slightly more complicated than that. So when you hear
Speaker 2: someone talk about the Fed's interest rate, what they are
Speaker 2: talking about is the Federal funds rate. And technically what
Speaker 2: they're talking about is the target Federal funds rate. So
Speaker 2: I'm going to quote from the Federal Reserve self quote
Speaker 2: the effective Federal funds rate is the interest rate at
Speaker 2: which depository institutions, banks, savings institutions, thrifts, and credit unions
Speaker 2: and government sponsored enterprises borrow from and lend to each
Speaker 2: other overnight to meet short term business needs. The target
Speaker 2: for the Federal funds rate, which is set by the
Speaker 2: Federal Open Market Committee, has varied widely over the years
Speaker 2: in response to prevailing economic conditions. So yeah, Also, by
Speaker 2: the way, it is technically the Federal Open Market Committee
Speaker 2: that sets the fund rate. But okay, when we're talking
Speaker 2: about the FED setting the interest rates, right, there's kind
Speaker 2: of two things going on. So the effective federal funds rate,
Speaker 2: which is the thing that they're trying to control, is
Speaker 2: the interest rate at which all of these different banks
Speaker 2: that have their money in here are all using it
Speaker 2: to lend to each other overnight. Through the money they
Speaker 2: have the Federal reserve, they're all lending it to each other.
Speaker 2: The average of the rate of interest that wistre lending
Speaker 2: to each other overnight, the average of that rate is
Speaker 2: the Federal funds rate. When people talk about like the
Speaker 2: interest rates like three point two percent or whatever, what
Speaker 2: the FED is trying to do is make sure that
Speaker 2: at the end of the night. This effective federal funds rate,
Speaker 2: which is the rate that all these banks will lending
Speaker 2: each other money at, is at that rate. But they
Speaker 2: don't actually technically directly have control of this, because it
Speaker 2: is to be clear, the average rate of which all
Speaker 2: of these banks are lending to each other. What the
Speaker 2: FED is manipulating directly usually is the interest on reserve
Speaker 2: balances or IRB. So this is the thing the FED
Speaker 2: does control. The interest on reserve balances is how much
Speaker 2: interest they pay out for just putting your money in
Speaker 2: the FED and leaving it there. I'm going to quote
Speaker 2: the FED again. The Fed's primary tool for influencing the
Speaker 2: federal funds rate is the interest the FED pays on
Speaker 2: funds that banks hold as reserve balances at their Federal
Speaker 2: Reserve Bank, which is the interest on reserve balance's rate.
Speaker 2: Because banks are unlikely to lend funds in the federal
Speaker 2: funds market for less than they get paid on their
Speaker 2: reserve balances at the Federal Reserve, the interest rate on
Speaker 2: reserve balances is an effective tool for guiding the federal
Speaker 2: funds rate. Okay, Mia, you've been spelled gibberish for many minutes. Now,
Speaker 2: what the fuck does that mean. So what the FED
Speaker 2: is normally doing is all right, So you put your
Speaker 2: money in a bank, right, and that bank has an
Speaker 2: interest rate, and it pays you out that amount of
Speaker 2: interest at the end of the year, right, And that's
Speaker 2: the money that you are making for putting your money
Speaker 2: in this corporation. The FED also has their own interest
Speaker 2: on reserve balances, so that they have their own interest
Speaker 2: rate for how much money you can get from just
Speaker 2: leaving your money in the Federal Reserve. And the theory,
Speaker 2: and this is like you know true, is that banks
Speaker 2: aren't going to lend each other money at interest rates
Speaker 2: that are lower than what you can get from the FED,
Speaker 2: because otherwise you just leave your money in the FED
Speaker 2: and you get them out amount of money. So if
Speaker 2: you're going to you know, loan someone something, right, the
Speaker 2: interest that's being charged here is going to be higher
Speaker 2: than the FED rate. And that's when we talk about
Speaker 2: FED said interest rates. That's what's happening on a technical level,
Speaker 2: and this is actually very important in the global economy
Speaker 2: because what this does and this is where everything gets
Speaker 2: extremely murky. And I'm going to go to a very
Speaker 2: very high level of abstraction down from sort of the
Speaker 2: very low technical details. Now, in theory, what this means is,
Speaker 2: this is how easy it is to obtain money to
Speaker 2: like invest in stuff. Right, this sets the rate at
Speaker 2: which you can borrow money. And in theory, if you
Speaker 2: have a very very low interest rate, right, if the
Speaker 2: FED funds rate is really low, then is very very
Speaker 2: cheap and easy to get a bunch of money, and
Speaker 2: that money flows to the economy and theoretically that money
Speaker 2: will you know, be used to invest in stuff and
Speaker 2: that will increase economic growth. Okay, So why wouldn't the
Speaker 2: FED rate just always be zero? And the answer to
Speaker 2: that is that the FED, as an institution and this
Speaker 2: is part of its legal framework that established it, is
Speaker 2: also trying to control inflation. And the theory effectively is
Speaker 2: that if you leave these things for too low for
Speaker 2: too long, it will cause inflation, and it will cause
Speaker 2: economic bubbles that are not actually supported by the return
Speaker 2: on investment. Because if you can just always continuously borrow
Speaker 2: money for zero dollars, then you can just invest in
Speaker 2: anything as long as the return is like slightly more
Speaker 2: than like nothing. However, Comma raising interest rates is used
Speaker 2: as a way to try to slow economic growth in
Speaker 2: order to not have inflation result, right, and also to
Speaker 2: not have there be sort of speculative bubbles. And right
Speaker 2: now we've entered a period in which interest rates have
Speaker 2: been rising after a pretty prolonged period of interest rates
Speaker 2: being effectively zero, like following the two thousand and eight
Speaker 2: financial collapse. They've been really low for like a while
Speaker 2: for some stuff in the nineties that we're going to
Speaker 2: get you later. But this is basically the primary dispute,
Speaker 2: which is that Okay, now, obviously the FED is to
Speaker 2: some extent a political actor. But the question or is
Speaker 2: who is going to get to set these sort of
Speaker 2: interest rates? Right? Is it going to be the President
Speaker 2: of the United States? Right? Is it going to be
Speaker 2: that Donald Trump can just be like, oh, economy look bad,
Speaker 2: turned down the interest rate? Or is it going to
Speaker 2: be the Federal Reserve itself, which is how it presently
Speaker 2: functions running this And that's what FED independence means. So
Speaker 2: what is that stake? Here is one of the defining
Speaker 2: the defining mechanisms of sort of economic control, of control
Speaker 2: over the function of the economy. You know that this
Speaker 2: is called like a macroeconomic policy lever Right, This is
Speaker 2: one of the largest, most important and most powerful tools
Speaker 2: that exists in the entire world economy for managing and
Speaker 2: regulating the American economy. And the question is is this
Speaker 2: going to remain with this sort of quasi technocratic, independent
Speaker 2: staff or is it going to be directly set by
Speaker 2: the presidents? And that is a huge fucking deal because,
Speaker 2: as you mentioned last time I talked about this, there
Speaker 2: have been times where presidents have gotten control over central banks.
Speaker 2: For example, the sort of scare story that everyone is
Speaker 2: talking about is Turkey where Airdwan, their effectively dictatorial leader,
Speaker 2: managed to break the independence of his own central bank
Speaker 2: and inflation rates are now merely forty percent. So this
Speaker 2: is what's at stake. It's who gets to control this thing.
Speaker 2: Is it Donald Trump or is it the Federal Reserve.
Speaker 2: Now we are going to go to ads and we
Speaker 2: are going to come back and talk a bit more
Speaker 2: about some of the nightmares that can happen here. Now. Okay,
Speaker 2: so we've been talking mostly about the Fed interest rate
Speaker 2: because that is most of what it does. Well, that's
Speaker 2: not most of what it does. That's the most important
Speaker 2: thing that it does on a political level in terms
Speaker 2: of you know, this is why Donald Trump wants it However, Comma,
Speaker 2: the FED does a bunch of other shit, like, for example,
Speaker 2: a whole bunch of the world's gold supply owned by
Speaker 2: a bunch of countries across the world sits in a
Speaker 2: vault under the Federal Reserve building. The FED has a
Speaker 2: balance sheet right of like the assets that it owns,
Speaker 2: and that balance sheet is right now about six and
Speaker 2: a half trillion dollars. The payment system that the FED
Speaker 2: maintains has two trillion dollars a day moving through it.
Speaker 2: Right this payment infrastructure, the infrastructure of the Federal Reserve
Speaker 2: is the core of the functioning of the entire American
Speaker 2: banking system. Like I kind of emphasize this enough, and
Speaker 2: this is also you know, important on a macro international level, right,
Speaker 2: like this is functioning sort of normally. Is the difference
Speaker 2: between capitalism working kind of normally, which is not good
Speaker 2: but is working and did not working and Trump is
Speaker 2: trying to take control of it. And again, this is
Speaker 2: a guy who wants to invade Greenland, and she is
Speaker 2: trying to take control over one of the most powerful
Speaker 2: economic institutions that has ever existed in human history. So
Speaker 2: these are the sort of the stakes of the fight
Speaker 2: that's happening here, because again, the FED is supposed to
Speaker 2: be an independent entity, right, The President is not supposed
Speaker 2: to be able to order the FED to just do
Speaker 2: whatever it wants. And this is what's at stake with
Speaker 2: Trump trying to fire one of these Reserve Board presidents,
Speaker 2: with Trump trying to prosecute the current head of the
Speaker 2: Federal Reserve and use that threat to bring the FED
Speaker 2: into line with doing what he wants to do. Now,
Speaker 2: Trump is also again attempting to install him his own
Speaker 2: guy when Jerome Powell's term as the chairman of the
Speaker 2: Federal Reserve Board ends. And Okay, in terms of could
Speaker 2: the Trump administration actually run this, right, I'm gonna read
Speaker 2: this quote from actually a very good Yahoo story about
Speaker 2: the search for Trump's knew who he wants to run
Speaker 2: the Federal Reserve. This is starting with a quote from
Speaker 2: Trump's Treasury Secretary Scott Bessett, Who's been the guy who
Speaker 2: is running the candidate search quote, who can bring the
Speaker 2: board along with them? Who has the gravitas, Bessett said,
Speaker 2: who is going to have an open, green span like
Speaker 2: mind that we could be going through a productivity boom
Speaker 2: like we did in the nineties and not just throw
Speaker 2: the brakes because we're alarmed at a high GDP number. Okay,
Speaker 2: if you have spent your life closely following American mac
Speaker 2: co economic policy, that is nuts. That is a terrifying statement,
Speaker 2: utterly horrifying. Now, mil why is it scary to say
Speaker 2: that he wants a green Span like mindset that doesn't
Speaker 2: throw the brakes on the economy because they're alarmed by
Speaker 2: a gdpeda. But why is that scary? And this is
Speaker 2: also you know, why is it scary for the Trump
Speaker 2: administration to have direct control of the Federal Reserve. Part
Speaker 2: of the reason we haven't had a full scale economic
Speaker 2: collapse in two thousand and eight has been that there
Speaker 2: has been a bunch of very very careful management of
Speaker 2: the economy by the Federal Reserve. Right, they have done
Speaker 2: a lot of technical stuff. You know, I'm saying they've
Speaker 2: done a lot of technical stuff. Well, when I say well,
Speaker 2: I mean for the functioning of capital, like you and
Speaker 2: me and everyone listening to this. Is it working for us? No,
Speaker 2: not really, but it's working for capital, right, And they've
Speaker 2: been able to prevent an economic collapse through a lot
Speaker 2: of sort of technical means. In twenty twenty and you
Speaker 2: see this now. They did these things called overnight repo injections,
Speaker 2: where they would pump like one hundred billion dollars in
Speaker 2: liquidity into the bank markets overnight in order to make
Speaker 2: sure there was liquidity to because that was one of
Speaker 2: the things that cost two thousand and eight collapse. So
Speaker 2: they've been doing a bunch of very careful management, some
Speaker 2: of it in these large swings that have very little
Speaker 2: public attention, some of it in just the way they've
Speaker 2: been doing policy. What these guys want to do is
Speaker 2: the Greenspan stuff from the nineties. So, okay, Mia, what
Speaker 2: the fuck is that? So what he's talking about is
Speaker 2: the green Span put Now what happened to the nineties?
Speaker 2: To simplify the story a little bit, but I'm not
Speaker 2: even really simplifying it much. Every time the market went down,
Speaker 2: green Span would just lower the interest rate to make
Speaker 2: the market go back up. Right, So every single time
Speaker 2: it even sort of looks like the market might be
Speaker 2: going down, he makes the cost of borrowing from the
Speaker 2: Fed cheaper, so you can just take more money out
Speaker 2: of the Federal Reserve and plunge that money back into
Speaker 2: the stock market. Right. That's the theory here. The economist
Speaker 2: Robert Brenner called it asset Kanesianism. This is something we
Speaker 2: have talked about on the show many, many, many times,
Speaker 2: and it is to a large extent, the thing responsible
Speaker 2: for the two thousand and eight economic collapse, and also
Speaker 2: the dot com bo will before that, and arguably also
Speaker 2: the Asian market collapses in the nineties. Okay, you know
Speaker 2: you're you're dealing with a problem, which is that you
Speaker 2: don't have a manufacturing economy that can support economic growth.
Speaker 2: So what are you gonna do instead? Okay, we're gonna
Speaker 2: give everyone a bunch of money so they can do
Speaker 2: speculative investing in stocks. And we're gonna give him one
Speaker 2: a bunch of money so that they can go invest
Speaker 2: in the housing market because housing prices will only ever
Speaker 2: go up, and that's the thing that these people want
Speaker 2: to do. Right And in terms of why, okay, why
Speaker 2: should you be scared about this? Right? This is like
Speaker 2: saying that, Okay, we need to bring back the guys
Speaker 2: who did all of the like mortgage backed securities in
Speaker 2: two thousand and eight that went up and put them
Speaker 2: in charge of like the world's most powerful economic institution.
Speaker 2: So the candidates that Trump is talking about putting in place,
Speaker 2: I don't know if any of them are going to
Speaker 2: make it right now, because I think the kind of
Speaker 2: person Trump is looking for is not the kind of
Speaker 2: person who like runs this kind of thing normally. In
Speaker 2: terms of like what Trump would do with the guy
Speaker 2: that he sort of installed there, we can look at
Speaker 2: who they've already installed, right And the one Federal Reserve
Speaker 2: Board member that Trump has successfully gotten in place is
Speaker 2: Stephan Miren, who, and I kind of emphasizes enough, I
Speaker 2: talk about how nuts this guy is all the time.
Speaker 2: This is the guy who wants other countries to pay
Speaker 2: taxes on holding US bonds, And this is the guy that,
Speaker 2: again is now one of the governors of the Federal
Speaker 2: Reserve Board because Trump put him there. I could spend
Speaker 2: another forty minutes ranting about how bad of an idea
Speaker 2: his Mara Lago Accords, which is his version of the
Speaker 2: Plaza Chords, would be. It's gibberish, it's atrocious, and these
Speaker 2: people are simple, not good enough at technical economic management
Speaker 2: to be put in charge of the Federal Reserve, the
Speaker 2: most powerful economic agency in the entire world. And again,
Speaker 2: as I've been saying, right, this economic management has been
Speaker 2: good for capital. Has it been good for us? Like? No,
Speaker 2: not really. However, COMMA putting that power directly into the
Speaker 2: hands of Donald Trump is an even worse idea. But
Speaker 2: it's also very important that this has been good for
Speaker 2: capital because FED independence is the red line for a
Speaker 2: lot of very very powerful sectors of capital who would
Speaker 2: be fine with things like like you could, like Trump
Speaker 2: could do public executions in the streets, and like GP
Speaker 2: Morgan eventually would be okay with it. Right, JP Morgan
Speaker 2: is like panicking over this Federal Reserve stuff. So this
Speaker 2: is actually a line at which segments of capital are
Speaker 2: willing to break with Trump because this is an existential
Speaker 2: threat to them. Now, before I sort of close this out,
Speaker 2: I've been giving what is essentially a very conventional analysis
Speaker 2: of what the Federal Reserve is, because to some extent
Speaker 2: you need a conventional analysis of what the Federal Reserve
Speaker 2: is to understand what the fuck is going on with
Speaker 2: these board things. But I want to give the final
Speaker 2: word to the anthropologist David Raper. This is from his
Speaker 2: book Debt the First five thousand Years. Quote one element, however,
Speaker 2: tends to go flagrantly missing in even the most vivid
Speaker 2: conspiracy theories about the banking system, let alone in official accounts.
Speaker 2: That is the role of war and military power. There's
Speaker 2: a reason why the wizard has such a strange capacity
Speaker 2: to make money out of nothing. Behind him, there is
Speaker 2: a man with a gun. True in one sense, he's
Speaker 2: been there from the start. I have already pointed out
Speaker 2: that modern money is based on government debt, and that
Speaker 2: governments borrow money in order to finance wars. This is
Speaker 2: just as true today as it was in the age
Speaker 2: of King Philip the Second. The creation of central banks
Speaker 2: represented a permanent institutionalization of that marriage between the interests
Speaker 2: of warriors and financiers that had already begun to emerge
Speaker 2: in Renaissance Italy, and that eventually became the foundation of
Speaker 2: financial capitalism. And this is something that's very very important.
Speaker 2: Right We've been talking about how important the FED is
Speaker 2: as an economic institution, and obviously the importance of the
Speaker 2: Federal Reserve is tied in with the fact that the
Speaker 2: dollar is the world's reserve currency, which makes it the
Speaker 2: most important currency on Earth. It means that every other
Speaker 2: country is doing a bunch of transactions denominated in American dollars,
Speaker 2: and it turns out when you can make American dollars
Speaker 2: that is an enormous advantage for you. But this is
Speaker 2: all based on American military power. Right. The reason that
Speaker 2: the dollar is the world reserve currency is because all
Speaker 2: of the countries that had competing currencies that could have
Speaker 2: been the international standard were sort of annihilated during World
Speaker 2: War Two. And at the end of World War Two,
Speaker 2: it was the United States left standing with the richest
Speaker 2: and most powerful economy on Earth, yes, but also like
Speaker 2: it was the country with nukes and the largest army
Speaker 2: that wasn't the Soviets. Right. The element here that that
Speaker 2: Graber is pointing out right is that the debt that
Speaker 2: you and me and everyone is like carrying out our
Speaker 2: day to day stuff with is war debt. Literally the
Speaker 2: thing that we used to like buy groceries is to
Speaker 2: a large extent, it's a tiny bit more complicated than this,
Speaker 2: but like it's loads that were taken out to like
Speaker 2: go bomb Vietnam. And part of what's happening under the
Speaker 2: Trump administration is that all of the things that used
Speaker 2: to be under the table, right, the US, you know,
Speaker 2: always had the kind of military power that Trump is
Speaker 2: sort of throwing around to try to, you know, invade
Speaker 2: Greenland or just kidnap the president of Venezuela and like
Speaker 2: run the country by gunboat. The US has always had
Speaker 2: the ability to do this, It's just that it was
Speaker 2: largely agreed upon by everyone involved running the system that
Speaker 2: using this power under the table was more effective than
Speaker 2: using it openly. The Trump administration thinks that, you know,
Speaker 2: using soft power or not explicitly, just like saying we're
Speaker 2: going to invade you is like womanly pussy cook shit,
Speaker 2: Like that's effectively what's happening here is and these people
Speaker 2: think that these relationships need to be drawn out into
Speaker 2: the open right. And so what we're left with here
Speaker 2: is a war between two sectors of capital, one of
Speaker 2: which wants to immolate the world to satisfy the ego
Speaker 2: of a tyrant, and the other of which wants to
Speaker 2: let climate chains immolate the world slightly slower, because doing
Speaker 2: anything about climate change would hurt the bottom line, but
Speaker 2: allowing the god king to immolate the world by himself
Speaker 2: would hurt their bottom line too. And this is effectively
Speaker 2: the problem with the moment that they're in, which is
Speaker 2: that neither of these institutions. Right, Donald Trump is not
Speaker 2: on your side. The Federal Reserve is also not on
Speaker 2: your side. What is necessary here, though, is not for
Speaker 2: sort of comrade Federal Reserve to join us. What is
Speaker 2: necessary here for our purposes is that enough sectors of
Speaker 2: capital when the time comes, right, when Trump finally does something,
Speaker 2: and when there's a popular reaction enough that forces a
Speaker 2: confrontration between Trump and the American people. When that time comes,
Speaker 2: what is necessary is that these massive and powerful economic
Speaker 2: institutions stand aside and not defend the regime. As I've
Speaker 2: talked about to a significant extent on this podcast already.
Speaker 2: This is how the Bolsheviks won their revolution. It's also
Speaker 2: how the February Revolution won, which was that large poor
Speaker 2: of the populace, large portions of the ruling class, and
Speaker 2: to some extent, large portions of the state simply set
Speaker 2: the conflict out because they didn't particularly like the revolutionaries.
Speaker 2: But they also weren't going to go die for some
Speaker 2: random tyrant, and that, in the end is what's important
Speaker 2: about this conflict. Right. There is, on the one hand,
Speaker 2: the possibility of Donald Trump just immilating the entire economy,
Speaker 2: and on the other there is the possibility of these
Speaker 2: people standing aside when we attempt to build a world,
Speaker 2: when we are not being lit on fire for profit.
Speaker 2: This has been It could Happen Here.
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Speaker 2: Thank