In today’s rapidly changing economic landscape, we are witnessing the consequences of government overreach and mismanagement. This article explores the significant pitfalls of institutions such as the U.S. Postal Service and the Federal Reserve, highlighting the persistent challenges they face.
The U.S. Postal Service serves as a poignant example of an overextended government institution plagued by inefficiency. In 2012 alone, it reported a staggering loss of $15.9 billion, equivalent to over $43.5 million lost daily. Such monumental waste underscores the severity of the situation at hand.
Recently, the Postal Service defaulted on a $5.6 billion payment meant for retiree health benefits. The logical solutions would seem to involve reducing costs, privatizing, or even shutting down the service entirely. However, such rational options are often dismissed when institutions are in such a dilapidated state. They become impossible to enact.
Moreover, the 220,000 members of the American Postal Workers Union are threatening to revolt against Postmaster General Patrick Donahoe for proposing cost-cutting measures like eliminating Saturday deliveries. Like the mythical Ouroboros, which eats its own tail, the union seems more inclined to consume itself rather than accept any cuts to benefits. This stubborn mentality has contributed significantly to the issues that have beset the Postal Service over the years.
For decades, decision-makers in such institutions neglected one crucial principle: the necessity of critical thinking.
Prior to 2008, the shortcomings of these organizations were masked by a growing economy. Budget deficits were quickly covered as an influx of tax revenue filled government coffers. This concealing of issues perpetuated the problems, enabling them to thrive in the shadows.
Clearly, the Postal Service is just one of many examples of decaying institutions. Another prominent case in point involves the Federal Reserve.
Legalizing the Money Power
The Federal Reserve is set to celebrate its centennial on December 23. Shortly thereafter, Janet Yellen will step into the role of its first female Chair. The question arises: how has the Federal Reserve persisted for an entire century, considering its seemingly flawed foundations?
The Federal Reserve was established through the Federal Reserve Act, which was hastily pushed through Congress on December 23, 1913, just two days before Christmas. This act created the central bank of the United States and gave it the authority to issue Federal Reserve Notes as legal tender.
Congressman Charles August Lindbergh Sr., who was fundamentally opposed to the Act, voiced his objections in the Congressional Record, stating:
“This Act establishes the most gigantic trust on earth… When the President signs this Act, the invisible government by the Money Power… will be legalized… The money power overawes the legislative and executive forces of the Nation and of the States.”
He further cautioned that the new law would enable trusts to create inflation whenever they sought it, predicting that this inflationary control could lead to manipulation of stock prices and economic instability.
The New Era of Fed Activism
Since its inception, inflation has been a consistent phenomenon linked to the Federal Reserve’s actions. According to the Bureau of Labor Statistics, the dollar has lost a staggering 96 percent of its value since 1913—the very year the Fed was established.
This ongoing inflationary trend disproportionately concentrates wealth at the top while disadvantaging workers and savers. Furthermore, recent years have seen unprecedented levels of Fed intervention in both the economy and financial markets.
Under Ben Bernanke’s tenure, real interest rates were driven below zero, and the money supply ballooned by over $3 trillion. This allowed the ultra-wealthy to borrow at virtually no cost and invest heavily in asset inflation. Unfortunately, the average citizen saw their wages, savings, and overall standard of living diminish as inflation eroded their purchasing power.
The more we understand about Janet Yellen, the more we believe her term may usher in a new era of significant dollar devaluation. As a fervent central banker, she seems to think that sheer money creation will guarantee job availability, irrespective of rising costs of living that threaten to outpace those very jobs.
Ultimately, the Federal Reserve appears fundamentally flawed, a condition that has persisted since its formation. Both Ben Bernanke and Janet Yellen embody this misguided approach. While Bernanke may have been merely uninformed, Yellen’s activism may prove reckless—certainly, her actions could inflict significant harm on the economy.
Sincerely,
MN Gordon
for Economic Prism
