The Federal Reserve is the most powerful central bank in the world.
Without its central bank, America would be subject to devastating
fluctuations in currency value and chronic economic instability. To
stabilize the economy, the Fed adjusts interest rates and intervenes in
the economy more directly when appropriate. According to most Fed
observers, it as an impartial referee exercising its independence free
from political interference in order to advance the best interests of
America. Its actions during the Great Recession were heroic, saving the
American and indeed the world economy from a far worse fate.
Wrong.
Lawrence Jacobs and Desmond King's Fed Power is the first sustained
examination of the Fed as a potent political institution that
systematically provides concealed advantages to a privileged few. The
authors trace the Fed's historic development from the fiery tug-of-war
over monetary policy during the 19th century to its current position as
the most important institution in the American economy, possessing
unparalleled capacity and autonomy to intervene in private markets. Yet
despite its power and resources, it was asleep at the wheel when the
crisis hit. After it hit, the Fed acted swiftly to contain the crisis,
but in the process exposed its real preferences. Jacobs and King dissect
how the Fed's programs during the Great Recession funneled enormous sums
to a select few in the finance industry while leaving Main Street
businesses adrift and millions of homeowners underwater. Far from
serving the national interest, the Fed increased economic inequality in
America and further enriched the "one percent."
America is heading into the next financial crisis without an effective
central bank. "End the Fed" is a popular slogan that not only voices the
people's displeasure with the Fed's favoritism, but also speaks to a
national feeling of the Fed's illegitimacy. Of course, we need a
powerful and capable central bank - getting rid of it is a roadmap to
mass unemployment and impoverishment. Jacobs and King present an
energetic reform agenda to build the sort of accountable central bank
that other countries, like Canada, already possess and which can help
ensure that the economy remains stable and prosperous for all and not
just a few.
