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Book Review: "FED UP"

When was the last time any of you wrote a book review? If you are like me, it has been a long while. I feel the need to share FED UP with our readers, listeners, and friends. So, it really isn’t so much a book review as shared thoughts about a book I recently finished.

Author Danielle DiMartino Booth spent 10 years inside the Federal Reserve, mostly doing research regarding the banking system, risk, people, and policy. Long-time listeners to our radio show know very well my feelings about the FED. Reading the book further enlightened me. The situation is far worse than I imagined, and that is why I felt compelled to write and present this review. I urge everyone to read the book, then decide for yourself if I have been right all along.

Booth begins with Ron Paul’s campaign to “End the FED,” which came to her attention in 2011, as protestors surrounded the Dallas Federal Reserve Bank. In those opening pages, I found my first disagreement with Booth. She believes that America needs a strong Central Bank, and that the FED can fill that role. I believe the whole Central Bank concept should be eradicated.

Thomas Jefferson, arguably the smartest of our Founding Fathers, warned early Americans against the adoption of a Central Bank. He believed it to be unconstitutional, as well as dangerous. His nemesis was Alexander Hamilton, who thought the Central Bank idea to be justifiable, constitutional, and necessary. Neither man lived to see who was the eventual winner, but Jefferson was able to postpone the adoption of a Central Bank by winning the Presidency.

The very existence of the FED, which was started in 1913, was a reaction to the Panic of 1907. Remember all those times I said the Congress often has the irresistible need to “do something?”. For a great account of the clandestine founding of the Federal Reserve System, I recommend Edward Griffin’s book, The Creature from Jekyll Island, which is worth a later book review.

The easiest error I could make in this review would be to bog you down with details. The subject is dry, the systems are complex, and the power is inestimable. I will attempt to give the listeners some insight as to the failures of the FED in accomplishing its goals, which include maintaining a steady dollar, reasonable inflation, and maximum employment. (What could possibly go wrong?)

I believe that when powerful people speak, normal people should be able to understand the words and the meanings. Alan Greenspan, as well as those who have followed, was so vague that we coined a term, Greenspeak (nowcalled Fedspeak), to describe the gibberish that poured from his mouth and from the minutes of the FED meetings.  For that he was held in the highest esteem. Not by me.

Ben Bernanke succeeded Greenspan as the Chairman of the FED in 2006, and I wish I could say that things got immediately better. Alas, no such luck. In 2014, the torch was passed to Janet Yellin, and once again nothing has changed. As they are all tried and true Keynesians, no policy improvements would be expected.

For those who do not have a grasp of Keynesian economics, Booth quotes Yellin from 1999, “Will capitalist economies operate at full employment in the absence of routine intervention? Certainly not. Do policymakers have the knowledge and ability to improve macroeconomic outcomes rather than make matters worse? Yes.”

There is more, so much more, but I will conclude my direct quotes with this little gem from Chairman Bernanke in 2002, “The U.S. government has a technology, called a printing press (or today, its electronic equivalent) that allows it to produce as many U.S. dollars as it wishes at no cost.”

This book helped me get past the feeling I get so frequently, when I look in a mirror and ask myself, “Is it me?”

In summary, FED UP is a must-read for anyone who follows money and investing, has an interest in politics, and/or wants to understand economics. Congratulations to Danielle Booth on a masterful inside look at an American problem. And, oh yes, “everybody does it” mentality applies, as Central Banks have been proliferated throughout the civilized world. A dismal thought from this economist and investor.

Van Wie Financial is fee-only. For a reason.