Hey, let’s go into McGlinchey’s, the cheapest bar in Center City. When I first entered this place in 1982, I was only 18, so to make myself look somewhat legal, I wore an old man jacket, bought at a thrift store for 2 bucks. Inside, I was thrilled to discover that a draft of Rolling Rock was only 50 cents, and a hotdog 25. Now they are $1.25 and 75 cents, respectively. This low life bar, my kind, is still dirt cheap, but that’s inflation for you.
Inflation is your dollars deflating. It’s your money going down, down, down, depreciating as the Federal Reserve injects more bucks into our banking system. And since the biggest banks own the Federal Reserve, the Fed is the banking system. Each time these banks give cash to themselves to be lent to you at interest, your dollars becomes a bit more worthless.
Though perceived by most Americans as a governmental agency, even the Federal Reserve admits that it is “an independent entity within the government, having both public purposes and private aspects.” As “an independent entity,” the Fed does not suffer from Presidential control or Congressional oversight. Though its Board of Governor is appointed by the President of the United States, each of its seven members serves for 14 years [!], with only one member replaced every two years. Out of the limelight, these shady gentlemen are more enduring than all of our Presidents, Senators and Congressmen, and certainly more powerful, since they represent banks that bankroll all of our politicians, who are their abject servants. The Fed can also inflate, deflate, strangle, rape or bleed dry the global economy. With such leverage, it does not care that a 2011 Congressional audit, the first ever, managed to discover that in less than three years the Fed lent $16.1 trillion to Citigroup, Morgan Stanley, Merrill Lynch and Bank of America, as well as banks in the U.K., Germany, Switzerland, France and Belgium. This astronomical sum is greater than our national debt or even the GDP, so where in hell or Foggy Bottom did it come from? Nowhere. From thin air. With Godlike power, the Fed can just conjure up cash, and thus just about everything else, into being. Here a mansion, there a yacht, and now, with a few keyboard strokes, a brand new slave, or many, many slaves!
Subconsciously thinking, Daddy, send us money, the infantile sees each gross increase in the money supply as dollars sloshing through the system, benefiting everyone, but if quantitative easing were a magic bullet, Weimar and Zimbabwe would be success stories. If we could just monetize our way out of trouble, then why not pay all of our debts right now with newly minted cash, and bypass the painful interest payments? Why not revive this economy by sending each citizen a huge check? Not 600 piddly bucks, like Bush did, but a billion dollars for each man, woman, child and dog? It can’t be done because our creditors aren’t dummies. As Vladimir Putin said about us, “They are living like parasites off the global economy and their monopoly of the dollar.” So Russia, China, Japan, Brazil and our many other creditors are neither reassured nor amused when Allan Greenspan explained that “the U.S. can pay any debt that it has because we can always print money to do that.”
The Federal Reserve used to tell us how many dollars were in circulation, but in March of 2006, it stopped. A sane man would deduce that it wanted to hide how much inflation it was generating, but, no, this sudden opacity was merely a cost cutting measure, so explained the Fed, the profligate, money pumping Fed.
To grasp immediately how much your dollar has depreciated, look no further than the price of gold. In 1982, an ounce was less than $500. Now it has breached $1,800. Surging gold price also indicates that people are losing faith in their economic, political and social system, and that they fear the immediate future. When gold shoots up, this house is coming down. Wander into any Vietnamese or Cambodian neighborhood, you’ll see an inordinate number of jewelry stores selling gold. People who have been traumatized by war and dictatorship don’t trust in banks or even money, but only gold to help them survive any societal upheaval.
So if the dollar is sinking, why accumulate it? First of, foreign governments must have dollars to buy oil, since no country can sell petroleum for anything but the dollar. The only renegades to this rule are Iran and Venzuela. Accepting Chinese yuans for oil, they have constantly been threatened by Washington. If euros, yens, yuans or rubles were generally accepted for oil, the United States would quickly become irrelevant and no one would have to send us real products for our increasingly worthless paper.
This petro dollar arrangement is enforced by the U.S. military. As Saddam Hussein and Muammar Gaddafi have found out, America will rain bombs on your people’s heads if you try to escape from this racket. Gaddafi wanted to nationalize Libya’s oil fields. He also proposed a common currency for Africa. In their trade with each other, African countries could then be free from the tyranny of the dollar, but such insolence could not go unpunished. America will hold a gun to your head to make sure you go on biting its bucks.
Making money on interest, banks generate debt for you and me, and for the government itself. This system is buoyed up from us drowning, and to keep us spending beyond our means, it must make us delirious with wants. Hence, this nonstop seduction everywhere you look. Don’t think or reflect. Lust. In 1982, there was only one television in McGlinchey’s. Now, there are four. As music blares, the unceasing come-ons flicker above our heads. Buy this, buy that, screw me, or rather, make love to my mirage.
Traditional virtues such as prudence and self control have been jettisoned, to be replaced by an insatiable appetite that breeds frustration, boredom, numbness and violence. In 2009, five blocks from here, a flash mob attacked a 56-year-old man riding home from work. They beat him unconscious and stole his credit cards. One of the perpetrators then bought over $5,000 of Ralph Lauren, Giorgio Armani and other high-end merchandises. He had the loot delivered to his front door, and that’s how twenty-one-year-old Stephen Lyde was caught. Though poor and obviously inexperienced with a credit card, Lyde was lusting after all the finer things possessed by those at the very top, and just like many of them, he was willing to commit violence. Unlike white collar crooks, however, Lyde pounced on his victim directly. If America were to start yet another war, how many stockholders would rejoice?
Our banking system makes money out of nothing, lends us cash that it doesn’t even have, and with Washington as its protector and enforcer, ensures that what we own is worth less and less, while we must work more and more to make payment after unending payment, with compounding interest, penalties, fees and whatever else it feels like tagging on at the end. The Federal Reserve, then, is not an institution with “public purposes and private aspects,” but exactly the opposite. Like our federal government itself, it is a cartel with ruthless, private objectives hidden behind a public façade.
The Fed has private purposes and public aspects, and as long as this parasite controls our wallets and government, you can count on more wars, bankruptcies, foreclosures, increasingly severe inflation and looting frenzies of every kind.
Linh Dinh is the author of two books of stories, five of poems, and a just released novel, Love Like Hate. He’s tracking our deteriorating socialscape through his frequently updated photo blog, State of the Union.