The Fed: Still Shrouded in Secrecy After All These Years
And this is the condemnation, that the light has come into the world, and men loved darkness rather than light, because their deeds were evil. For everyone practicing evil hates the light and does not come to the light, lest his deeds should be exposed.
John 3:19-20
The words from John at the top of this post are readily recognized by Christians as coming from Jesus’ dialogue with Nicodemus, the Pharisee who came to inquire of him one night. The immediate application of Jesus’ words is, of course, to himself as the light who came into the world and was rejected of men, for they loved evil and feared lest their deeds should be exposed.
But while Christ said these words in the context of explaining his person and purpose for coming in the flesh to Nicodemus, his comments have a wider application. They are a specific case of a broader principle we see in Scripture, that of the Christian principle of openness and honesty. Those who love the truth do what they do in the open. They let their light shine before men that others may see their goods works and glorify their Father in heaven. On the other hand, those who practice evil, those who have something to hide, they do their work in the dark, fearing to be seen by men.
One application of the principle of openness and light is the Christian idea of government as a servant of the people, not as their master. When the disciples argued about who was the greatest, Jesus explained the Christian concept of leadership, which was radically different from the model the world offered. Christ explained that the rulers of the Gentiles “exercised lordship” (lorded it over) them, but such was not to be the case among his followers. Following Jesus example, those who would be first in the Kingdom of Heaven were to be servants of all.
With Jesus words in mind, it should come as no surprise that one of the side effects of the 16th century Reformation was a significant change for the better in civil government. Writing in Christ and Civilization, John Robbins noted,
The revolution first accomplished in the churches could not be confined to them, but quickly spread to civil governments. Not only was there a reduction in the power of churches in Protestant societies, but a reduction in the size and scope of civil government as well. For example, Steven Ozment reports that “when the Reformation was consolidated in Rostock in 1534, it brought not only an end to the privileges of the clergy but also a government agreement to reduce its own number by about one-third,” and to submit to a detailed annual accounting (122). Karl Holl, Professor of Church History at the University of Berlin (1906-1926), wrote, “…it was the Reformation that first set a rigid limit to the absolute power of the State.”
Now let those words sink in for just a moment. If you’re like me and long to see the seemingly impossible, a return to limited, honest government, what took place at Rostock in 1534, the reduction of civil government by a third and its agreeing to submit to an annual accounting, appears as something not far from a miracle.
But just as the Christian Reformation brought about a “rigid limit to the absolute power of the State” in the 16th century, so too has the abandonment of Reformation doctrine in the 19th, 20th and 21st centuries led to the recrudescence of big, unaccountable government.
The current presidential election cycle in the U.S. has produced no end to the calls for bigger government. Indeed, on the Democratic side the candidates have spent months fighting it out to determine who can give away more public loot the fastest. For the first time in my lifetime, among progressive Democrats there have been open calls for socialism.
The Republicans talk a better game on this point. President Trump, for example, publicly stated that American would never be a socialist country to loud applause. Very well, let us hope he is right. But since that speech, the president has added another branch to the military and praised a major infrastructure bill in his latest State of the Union address just a few weeks ago. Indeed, at the end of January Politico reported that “The federal deficit under President Donald Trump will top $1 trillion this year” and project an average deficit of $1.3 trillion over the next ten years. In the opinion of this writer, the actual deficits likely will be much larger.
And while government – federal, state and local - keeps getting larger and larger and more and more intrudes into our lives, regardless of whether the Republicans or the Democrats are in power, it also is becoming steadily more secretive.
While not the only example of secret government, the Federal Reserve could certainly be put forth as Exhibit A in this regard. Technically not part of the federal government – although chartered by the Federal Reserve Act, it is privately owned - the Fed, America’s central bank, has been shrouded in darkness even before it was officially voted into existence on Christmas Eve, 1913. In the first chapter of The Creature from Jeykyll Island: A Second Look at the Federal Reserve, author G. Edward Griffin describes the 1910 secret meeting on Jekyll Island, Georgia, where powerful senators and financiers met to draw up plans for the Federal Reserve. It was, in Griffin’s words, “a classic conspiracy.”
Over the years, the Fed has jealously maintained it secretive nature. One writer captured the mysterious nature of it quite well in the title of his book on the Fed, Secrets of the Temple: How the Federal Reserve Runs the Country.
Over the years various attempts have been made to open the Fed’s books and reveal the temple’s secrets, but to date they have come up short. The last time Congress tried to pass a bill to increase Congressional scrutiny of the Fed, then Fed Chairman Janet Yellen wrote a three page letter to then Speaker of the House Paul Ryan and Democratic leader Nancy Pelosi complaining that the proposal would “severely impair the Federal Reserve’s ability to carry out its mandate to foster maximum employment and stable prices.” Nothing ever came of that bill.
When overnight repo rates suddenly spiked from around 2% to 10%, the Fed immediately swung into action to tamp rates back down. This intervention, which was originally supposed to last a few days or a few weeks at most, is still going on nearly five months later.
One odd thing about it: There has never been a clear, official explanation concerning the reason the overnight rates spiked as they did.
Back in October 2019, presidential candidate Elizabeth Warren wrote a letter to Treasury Secretary Steve Mnuchin asking “why they [the Fed’s nightly bailouts of the repo market] were necessary.” The letter made the news cycle for a day or two, then disappeared into the ether. It seems that the powers-that-be sat Warren down and explained to her how things are, that one does not tug on Superman’s cape, even, and perhaps especially, a presidential candidate.
The Fed, it’s still shrouded in secrecy after all these years.
Just to be clear, this is not an endorsement of Elizabeth Warren’s presidential candidacy, but she was not wrong to ask for an explanation of the Fed’s actions. Curiously, though, she went to the Secretary of the Treasury with her question, not to Jerome Powell, Chairman of the Fed. The reason for her choice of action is unclear to this author.
To date, there still has been no adequate, official explanation why the Fed is bailing out the repo market in increasingly large amounts each night. The official word is, move along folks, nothing to see here.
This has left truth seeking financial analysts to speculate about just what’s on fire to cause the spike in overnight lending rates an the now five months old bailout. One common suspect is Deutsche Bank (DB), the largest bank in Europe, which has been on fire for a number of years and almost certainly should have collapsed by now. That it is still standing is evidence that DB is secretly being bailed out. Given the Fed’s actions in 2008, it is not at all unreasonable to suspect that its bailout of the repo market is in some way related to keeping DB alive.
A Better Way
As was mentioned earlier in this post, Jesus’ words comparing the world’s approach to government – “the rulers of the Gentiles exercise lordship over them” – to the Christian approach to government, those who seek to lead are to serve, has a much wider application than just he church.
At the time of the Reformation, we began to see this put into action, as both the size and scope of government were reduced, and governments were subjected to an annual accounting.
But in the decadent 20th and 21st centuries, we have witnessed a reversal of the gains made during the 16th century. Governments have grown ever larger, and governors have come to see themselves, not as the servants of the people, but as a privileged class to whom ordinary people must give obeisance.
In many nations throughout the West there is an increasing sense that government of the people, by the people and for the people - these words, by the way, known to most Americans as part of Abraham Lincoln’s Gettysburg Address, were not original with Lincoln, he was quoting John Wycliff who in 1384 wrote in the prologue of this translation of the Bible, “The Bible is for the Government of the People, by the People, and for the People - has become a forgotten concept.
There is good reason for people to believe this.
But if Western nations are ever to recover some semblance of their lost liberties, that change will not come through the political process. It will have to come through the pulpit.
Jesus said, “Therefore if the Son makes you free, you shall be free indeed.” Jesus’ primary reference here was spiritual freedom, but it is not a stretch to see in his statement political and economic implications as well.
It was the Reformation’s teaching of Justification by Faith Alone that first brought spiritual, and later, political and economic freedom to the nations it touched. And it is the disappearance of Reformation doctrine in those same nations that has led to their increasing slide into political authoritarianism.
Quite possibly the most egregious example of the enslavement of once free nations in Europe and North America is the erection of a system of secretive central banking in those same nations over the past century or so.
Ron Paul tells us that we need to audit and then end the Fed. To this I can only say amen.
But for that to happen, the American people have a lot of repenting to do.