If I interpret John K. Galbraith correctly (”Money”), the Federal Reserve ceased to be of any policy relevance after Benjamen Strong chaired it and helped bring about the Great Depression. Strong was succeeded by Mariner Eccles, who was probably a champion of Keynesianism before Keynes wrote the “General Theory”. (He probably consulted with Keynes during the latter’s visit to the US in 1934). I found this post from Robert Reich about Eccles:

“Marriner S. Eccles who served as Franklin D. Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 gave his view of what caused the Depression in his memoirs, “Beckoning Frontiers” (New York, Alfred A. Knopf, 1951):

“As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

“That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers’ loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

“The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

“Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

“This then, was my reading of what brought on the depression.”

“Ce plus change, ce plus la meme chose.” Doesn’t Mariner Eccles about sum it all up?

But don’t let auditors recommend that the Fed curtail issuance of debt and instead issue debt free currency. That’s when the Repubs will jump ship and show their true colors; support for usury and an infinite debt service burden for America’s middle class and poor.

We, as their constituents, have to make sure that they sign on. (Harman, of course, excepted).

Their worst nightmare is that Ron Paul’s 30 year crusade produces positive results and the Fed loses its management of the greatest Ponzi scheme in history.

No, the Fed dosen’t want to see America financially stable. There is just no way its Masters will allow a return to debt free currency, which, as they are well familiar, produces prosperity for all and relegates the banks and other “monarchies” to impotents in their centuties old war to control governments and economies.

An excellent book on the topic of our money and our debt is, Ellen H. Brown, “Web of Debt” 2007. She presents a sober view of what we’ve been up against and how to resolve the issue of public debt.

Just brainstorming.

They (the government) would have you believe that powerful people never conspire and that trying to piece together the speckled evidence of these conspiracies is only for the realm of nuttery.

— the exiled ToqueDeville

http://www.dailykos.com/story/…..rist-Label