he Federal Reserve’s independence is currently being challenged by political forces seeking to reshape its mandate. The Fed has not always been independent of Congress and the Treasury. Its independence was formalized only in 1951, with a Treasury-Federal Reserve Accord that was not a law but a policy agreement redefining the relationship of the parties. In the 1930s and 1940s, before the Fed officially became “independent,” it worked with the federal government to fund the most productive period in our country’s history. We can and should do that again.
In a Sept. 1 Substack post titled “Fed Faces Biggest Direct Challenge by a President Since JFK – and This Is a Good Thing,” UK Prof. Richard Werner shows that there is no evidence that more independent central banks deliver lower inflation. In fact, per his findings, central bank independence has no measurable impact on real economic performance, and greater central bank independence has resulted in lower economic growth.
This two-part series will probe the forces in play now to overhaul the Fed, and the feasibility of redirecting it to use its tools, including “quantitative easing,” not just to save the banks but to save the economy. Part I looks at a particularly flawed Fed policy — Interest on Reserves (IOR) — which burdens the budget, stifles liquidity, and subsidizes banks. Then it suggests ways that eliminating IOR and reining in the Fed’s independence could solve the Treasury’s interest burden altogether.
Continue reading here.
Yes, the FED is the handmaiden of the banks in "normal" economic times and their bailbondsman when the banks screw up as in 2008. Yes, the FED's charter needs to be amended to serve all economic agents not just Finance as you correctly point out that IOR does. Yes, "free" market theoretics is actually a misnomer for its actual effect which is financially dominating chaos via the banks wielding of their monopoly paradigm concept of Debt Only for the creation and distribution of all new money. Yes, yes, yes greenbacks are the model for money creation. Why? BECAUSE THEY WERE MONETARY GIFTS!...that plus they were probably the primary reason the North won the Civil War, and the only reason that inflation occurred afterwards is we were on a gold standard instead of a fiat/double entry bookkeeping money creating system and didn't have digital technology as we do now.
So lets have the reforms you suggest and also the policy program of Wisdomics-Gracenomics including the most beneficial and democratizing policy since forever a 50% Discount/Rebate at retail sale which would mathematically double everyone's purchasing power and transform chronic erosive inflation into beneficial price and asset deflation because it is implemented with digital technology at the terminal ending point and summation of all costs where production exits the economy and becomes consumption and because it is the single universally participated in point in the entire economic process, namely retail sale, BENEFITS EVERYONE AND EVERY ECONOMIC AGENT INDIVIDUAL AND COMMERCIAL.
If we want to permanently resolve our economic problems and change the entire character of the economic and monetary system...change the present anomalous paradigm concept. As they say in the NFL "ya gotta go deep, go long!"...'cause the clock is ticking loudly.
Thank you Ellen! I had no idea we were paying IOR to big banks with our tax dollars. Definitely time to confront the Big Bank lobby and stop that. I look forward to your Part II!