An email exchange between myself and Barbara Mikulski, socialist senator from Maryland.

Dear Mr. Alexander:

Thank you for getting in touch with me about the Federal Reserve. It’s great to hear from you.

I appreciate hearing your views and I understand your concerns. Congress created the Fed in 1913 to serve as the central bank and set monetary policy for the United States. It has two goals: to promote full employment and contain inflation. Pursuing these goals requires the Federal Reserve be insulated against political pressures so that it can make decisions in the long term best interests of the economy. At the same time, the Fed must be accountable for its actions. This is especially true now after the Fed has taken such dramatic and unprecedented steps to head off the collapse of the financial system and the economy.

That’s why I supported the inclusion of an audit of all loans and financial assistance the Federal Reserve provided to banks during the financial crisis in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203). This law also calls for an audit of the Federal Reserve’s Board of Governor’s to ensure that the Board effectively represents the public and to avoid any potential conflicts of interest. This will provide greater transparency at the Fed.

Again, thanks for contacting me. Knowing of your views was helpful to me. Please let me know if I can be of assistance to you in the future.

Sincerely,
Barbara A. Mikulski
United States Senator

Dear Senator Mikulski,

Thanks for your response.

I’ve got to say, it’s a bit worrisome that your understanding of the intentions behind the origin of the Fed is limited to the goals enumerated by the Fed itself. That would be like dismissing the fraudulent nature of Bernie Madoff’s investment firm based on his own stated mission.

How extensive is your understanding of fractional-reserve banking (FSB)? Do you understand why FSB is beneficial for bankers and banking interests? Do you understand how and to the extent that FSB is detrimental to bank customers and the market, in general, as the purchasing power of currency is eroded? Do you understand that a central bank fosters and encourages fractional reserve banking among member banks? Do you realize that FSB is inflation? Do you understand that without a central bank fractional reserve banking–and in turn, inflation–would be checked indefinitely by the market?

Once you understand how banking really works you will be convinced that the Fed’s stated intention is a complete lie. The Fed does not contain inflation; rather, it is the ONLY inflation creator in the economy.

If you are interested in understanding the truth behind the Fed, I would recommend Murray Rothbard’s “The Case Against the Fed.” It is required reading for anyone who wishes to understand the fundamental principles behind money and banking, and ultimately, the effect that central banks have on the market. As a representative of the people of Maryland, and as someone who subjectively enacts coercive laws on a day-by-day basis, you should feel obliged to escape from your current state of ignorance. I have many other economic books I can recommend, just ask.

If the theory is too much to handle, then it’ll comfort you to know that the proof as to the Federal Reserve’s role as inflation-hawk is in the pudding. The purchasing power of the dollar has dwindled to 4% since the creation of the Federal Reserve. If the Fed is the institution in charge of containing inflation then it is a downright failure. This is undeniable.

Of course, the truth is that the Fed never was intended to check inflation. It was created so that counterfeit currency could be legalized among a select group of politically connected bankers. The beneficiaries of counterfeit currency are the parties that use the money first. The Fed’s member banks are those parties.

Your lip service to an audit of the Federal Reserve is apparent when the specifics of the Dodd-Frank Act are revealed. As you said, the audit of the Fed as mandated by the new law is restricted to the loans “provided to banks during the financial crisis.” The time period that is up for audit is only a few months in length, beginning in December 2007. This is not a comprehensive audit and it does not extend beyond the few months within that time-frame.

You mention that “this law also calls for an audit of the Federal Reserve’s Board of Governor’s to ensure that the Board effectively represents the public and to avoid any potential conflicts of interest.” Where exactly in the law does this occur?

The law certainly further empowers the Board of Governors by giving them a regulatory role as voting members of the new Financial Stability Oversight Council (FSOC) and by transferring Office of Thrift Supervision responsibilities to the Board of Governors.

It’s also true that the Board of Governors is now required to set a maximum debt-to-equity ratio of 15 to 1 for bank holding companies. While this is an improvement on the pervasive practice of 30 to 1 and higher holdings by these firms, 15 to 1 is still absurd. It is economically unsound, and a moral atrocity. Besides, it is even greater than the common ratio among commercial banks of 10 to 1. In a free-market banking system it would be incredibly difficult for a bank to expand their leverage holdings beyond their total equity for an extended period of time. So why exactly do we need you and your bureaucrat friends to regulate reserve requirements? There are plenty of productive things that you and your friends could be doing with your time. You don’t need to fabricate some arbitrary social need in order to fill your docket.

As far as auditing the Federal Reserve Board of Governors, I suppose the provision you must be referencing is section 122 which allows for an audit of the FSOC (which includes the Board of Governors). But this audit is done by the Comptroller General, an unelected official. How in the world can you expect that this unelected official will serve the public’s best interests? In addition, this audit carries with it the very same limitations already discussed concerning the audit of the Federal Reserve as a whole. In fact, I can’t find any proof that you are referring to two separate audits. Once the audit is complete, the Fed’s books will once again be closed forever, and they will continue their alliance between fellow bankers and politicians and against the American people.

You should be ashamed of your integral role in that alliance. You should be ashamed that you decided to forgo an honest living in the private sector so that you could help destroy a wonderful country and its people. You should be ashamed that you are on the side of history that spat in the face of the beautiful concept called liberty.

Your short existence in this world is marked only by your willingness to reverse the amazing progress this country made. I hope you are proud of yourself.

Come election day, I will do my part to kick you to the curb and force you to get a real job.

Thanks,
Jeremy

P.S. I think it’s hilarious that on your web contact form under the “Topic” drop-down there is no option for “Federal Reserve”, “Monetary Policy” or “Economy”.