The Fed, How It Came About And Where It Went Wrong

The Federal Reserve Bank - So, they are not part of the Federal Government, and they are not a Bank. Hmmm...

Absolute power corrupts absolutely. What started out as a good idea to help centralize authority would always devolve into a network of cronyism and back-room deals to enrich those at the top at the expense of those at the bottom.

It all went to shit with Nixon and then Reagan was the nail in the coffin with trickle down economics. All downhill from there, well except for those concentrating wealth at the top.

Summary:
In this video, Task discusses the Federal Reserve, its origins, and its intended purpose in providing liquidity to banks as an insurance against failures. He emphasizes that the Fed's role was not to finance the government but to support banking operations. Task highlights how government interference, particularly during Woodrow Wilson's presidency, led to the Fed deviating from its original purpose by being forced to buy government debt. He criticizes the Fed's involvement in areas beyond its intended scope, suggesting that politicians have manipulated its functions. Task argues that the Fed's actions have made it ineffective and have shifted its focus away from its initial role as a backstop for the banking industry.

Detailed Analysis:
Task delves into the history of the Federal Reserve, contrasting it with the previous clearinghouse system that faced challenges due to the shift from rural to urban areas and the concentration of resources in urban banks. He mentions how J.P. Morgan had to orchestrate funding to bail out the government before the establishment of the Fed. Task explains that the Fed, initially designed as an insurance company funded by member banks to provide liquidity to struggling banks, was later manipulated to buy government debt to finance war efforts during World War I by President Wilson.

Moreover, Task criticizes the Fed's involvement in buying government debt and straying from its original purpose of supporting banks facing liquidity issues. He disapproves of how the Fed's balance sheet is filled with government debt, questioning if it was the best use of its resources. Task notes that the Fed's functions have been distorted over time, leading to its ineffectiveness in handling economic crises and bank liquidity problems. He points out that politicians, like Elizabeth Warren, have influenced the Fed's actions, deviating it further from its intended role.

Additionally, Task highlights the limitations of the Fed's control over factors like interest rates, long-end yield curves, and money supply, indicating that the Fed's influence is often overestimated. He argues that the focus has shifted to activities beyond the Fed's core responsibilities, making it less effective in its primary role of supporting the banking industry during crises. Task concludes by suggesting that the Fed has become increasingly irrelevant since the 1950s due to political interference and mission drift away from its original purpose as an insurance provider for banks.

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