The Fed’s Shocking New Power Grab

NOTE: This article appeared on October 24, 2020.  It was written by Charles Hugh Smith for The Daily Reckoning. I have made a couple of small edits to this article and will suggest that he did not properly define his term “rigged casino stock market.” 

What he means (at least, what I think he means) is that most of the CARES Act stimulus money and virtually all of the Fed's quantitative easing programs have poured money into Wall Street, not Main Street.  The casino analogy is a poor one, because with unlimited money from the Fed stocks just keep going up - until they don't. Many stocks are now priced at between 30 and 100 times earnings, far above their historic "overpriced" levels of 16 times.  That happened because of the Federal Reserve. 

The article begins here:

The emergence of totalitarian democracy…

The Fed’s newest power grab is “so blatant that its sheer boldness boggles the mind”…

The Fed’s “free” money will not be free…

The belief that the Federal Reserve and its rigged-casino stock market are permanent is touchingly naive.

Never mind the existential crises just ahead; the financial "industry" projects unending returns of 7% per year. Or is it 14% per year?

Never mind the details, the Fed has our back. And since the Fed is forever, so too will be the gains for everyone playing the rigged games in the Fed's casino.

What makes this presumption so childishly naive is the tides of history are about to sweep away the era of central banks, their fiat currencies and their rigged casino markets.

The global citizenry increasingly realize that these are all forms of financial tyranny. But that doesn't occur to the Financial Aristocracy, which has luxuriated in the neofeudal dominance of finance — the modern-era equivalent of Monarchy and the rights of royalty.

Under the guidance of the Financial Aristocracy, so-called democratic governance has mutated into totalitarian democracy, that is, a "democracy" in name only, a carefully managed imitation that props up a facade of "democracy" that is pure PR.

The Fed Won’t Let a Good Crisis Go to Waste

It's pretty much universally recognized that authorities use crises to impose "emergency powers" that become permanent. This erosion of civil and economic liberties is always sold as "necessary for your own good."

Of course the collection of ever greater power in the hands of the few is for our own good. How could it be otherwise?

In this environment of "emergency powers," it's almost refreshing to find a power grab so blatant that its sheer boldness boggles the mind.

I'm talking about the Federal Reserve's FedNow, a proposed system of instant payments and digital dollars.

Yes, the Fed is busy planning a pivot to becoming "the people's source of free money forever" to save itself from oblivion.

FedNow bypasses both the traditional private banking sector and Congressional control of distributing money.

With FedNow, the Fed will be able to create trillions of dollars out of thin air and distribute the trillions directly into household accounts at the Fed.

Endless Free Money

The idea here is that an economy that is no longer financially viable can be propped up indefinitely by Fed free money; all we need to do is bypass the obsolete private banking sector (sorry about that, buckos) and the equally obsolete shards of totalitarian democracy (Congress, the presidency, etc.) and stave off the revolt with endless free money.

The rationale for the system is two-fold: The Fed sees the current ACH (automatic clearing house) payment system used by banks as too slow and limited.

Payments need to be instantaneous and there must be a way to reach unbanked households, the roughly 9 million U.S. households without a bank account. In the current system, stimulus payments couldn't reach these households quickly.

The solution is a new payment system in which every household and business in the nation would have an account at FedNow, so the Fed can transfer funds directly and instantaneously into every household account (and presumably every business that the Fed has chosen to fund).

The second part of FedNow is the creation of a digital dollar which is just like the existing dollar with one tiny little difference: unlike cash (for example, a $20 bill), the digital dollars won't be anonymous. Each newly created digital dollar will be trackable.

The Fed's rationale is that panic-hoarding of coins and cash by households is a problem, as the Treasury has to go to a lot of trouble to mint more coins and print more cash. The FedNow digital dollars will be quick and easy to create and distribute — and, ahem, track.

Do you see the monstrous power grabs this we're-here-to-help system would institute?

Total Control

1. The power to borrow and distribute money that is currently reserved for the elected representatives in Congress would be bypassed by FedNow.

Why wait around for slow, corrupt Congress to agree on stimulus, Universal Basic Income (UBI), etc.? With FedNow, the Fed can create trillions out of thin air and distribute the dough to households without any Congressional approval.

What's interesting about this is that Congress has no power to stop the Fed from printing endless trillions and distributing the money however the Fed chooses.

As an independent quasi-public agency, intended to be apolitical and outside the reach of corrupt politicos, the Fed is free to create and distribute as much new digital currency as it sees fit.

With FedNow, Congress has lost the government's monopoly power to distribute funds. Congress can still borrow and spend money, of course, but the citizenry's elected officials no longer have the monopoly granted by the Constitution.

2. The anonymity of the nation's money will be lost to the Fed's digital dollars. Perhaps the Fed will declare that only those who wear their underwear outside their clothing will avoid penalties. (Referencing the 1970s film Bananas.) Who's to say what the Fed will track, and for what purposes? The Fed, that's who.

A Whiff of Desperation

There's a whiff of desperation in these FedNow power grabs.

It's possible that the Fed has concluded that the elected legislative branch of government is now so thoroughly corrupt and dysfunctional that the Fed is forced to save the day, so to speak, by grabbing the power to create and distribute endless trillions to keep the increasingly impoverished and powerless citizenry from rebelling against the status quo.

The irony of course is that the primary source of the impoverishment of soaring inequality is the Fed itself, as the Fed's "permanent emergency powers" of sluicing trillions in free money for financiers has goosed the wealth of the top 0.1% while leaving 95% of the citizenry worse off as wage stagnation and rising inflation has eroded the standard of living/purchasing power of labor.

It's a nice trick, isn't it?

“Free” Money

First the Fed creates the inequality that makes rebellion inevitable and then it rides to the rescue with a power grab that nullifies the monopoly over governmental allocation of money the Constitution grants to Congress, and it destroys the anonymity of the "free money" it plans to distribute in the ultimate bread and circuses.

That endless free money stripped of the last vestiges of discipline will stoke an inflationary death spiral — well, we'll worry about that tomorrow.

The irony here is the Fed is only accelerating the demise of central banking, fiat currency and its rigged-casino stock market with its FedNow scheme to maintain its financial tyranny.

Alas, tyranny is still tyranny, feudalism is still feudalism, and history remains unkind to totalitarian regimes — even those which have morphed into a clever totalitarian democracy.

Clearly, the Fed reckons the public is foolish enough to believe the Fed's money will actually be "free."

Check out what you've lost before declaring anything "free."