Going back to the FOMC’s own archives reveals some truly stunning disclosures arising from none other than the Federal Reserve on the topics of inflation, currency “debauching”, money creation, and what it would take for the Communists and Stalin to win.
We begin with this 1951 letter from then Fed Chairman Thomas McCabe to Senator O’Mahoney defending the true independence of the Fed, and in objection to its being subsumed by the Treasury-banker oligarchy superclass:
I agree with you entirely that the Soviet dictators would like to bring about our economic collapse and, as you know, inflation is perhaps the greatest force for arraying the various sectors of a capitalistic economy against each other. John Maynard Keynes stated in his ‘Economic Consequences of the Peace’ (1919): ‘Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency…Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.’
Confidence of the public in Government securities as well as in other forms of liquid savings is inextricably bound up with public confidence in the value of the dollar. With the large overhand of such liquid savings, and considering among other things the heavy maturities of savings bonds coming up next year, it is extremely important that confidence in the dollar be firmly established by Government policies that destroy the inflation threat at its roots. Continuation of too easy money policies will make it next to impossible to engender confidence in the sustained real value of Government securities.
The interest cost on the public debt should be as low as is consistent with economic stability.Interest rates should be high enough, however, so that the debt will be bought and firmly held by the investing public and will not need the support of an undue amount of money creation…. We should also keep in mind that interest rates on short-term Government securities also decline in periods of recession as they did in the 30’s and more recently in 1949. I am old fashioned enough to believe that history will repeat itself and that over a period of years interest rates will fluctuate with changing economic conditions.
The Federal Reserve has always tried to avoid conflict with the Treasury. The record over the years shows patience, compromise and much sacrifice of basic convictions to this end. I am still hopeful that a basis of mutual understanding and agreement can be reached. If not, we will have no defensible alternative save but to do what, in our considered judgment, is for the best interests of the country, in accordance with our statutory responsibilities. We can, of course, always go to the Congress that created us and to whom we report and appeal for a redefinition of our responsibilities.
Not if in the pursuit of central planning, the Fed has effectively made Congress and its persistent inability to pass any laws, obsolete. But let’s go on with the following statement by Fed governor Marriner Eccles:
[We are making] it possible for the public to convert Government securities into money to expand the money supply….We are almost solely responsible for this inflation. It is not deficit financing that is responsible because there has been surplus in the Treasury right along; the whole question of having rationing and price controls is due to the fact that we have this monetary inflation, and this committee is the only agency in existence that can curb and stop the growth of money…. [W]e should tell the Treasury, the President, and the Congress these facts, and do something about it….We have not only the power but the responsibility….If Congress does not like what we are doing, then they can change the rules.
Source: FOMC Minutes, 2/6/51, pp. 50–51
We continue with this pearl from the same Eccles:
We favor the lowest rate of interest on government securities that will cause true investors to buy and hold these securities. Today’s inflation. . . is due to mounting civilian expenditures largely financed directly or indirectly by sale of Government securities to the Federal Reserve…. The inevitable result is more and more money and cheaper and cheaper dollars.
Source: FOMC Minutes, 2/7/51, p. 60
We continue with this excerpt from Fed Governor Martin’s speech accepting the appointment to the Board of Governors:
Unless inflation is controlled, it could prove to be an even more serious threat to the vitality of our country than the more spectacular aggressions of enemies outside our borders. I pledge myself to support all reasonable measures to preserve the purchasing power of the dollar.
We end with this underappreciated exchange between Marriner Eccles and Representative Wright Patman, confirming that the Fed has not been independent in over 60 years
Patman: Don’t you think there is some obligation of the Federal Reserve System to protect the public against excessive interest rates?
Eccles: I think there is a greater obligation to the American public to protect them against the deterioration of the dollar.
Patman: Who is master, the Federal Reserve or the Treasury? You know, the Treasury came here first.
Eccles: How do you reconcile the Treasury’s position of saying they want the interest rate low, with the Federal Reserve standing ready to peg the market, and at the same time expect to stop inflation?
Patman: Will the Federal Reserve System support the Secretary of the Treasury in that effort [to retain the 2 1/2 percent rate] or will it refuse?. . . You are sabotaging the Treasury. I think it ought to be stopped.
Eccles: [E]ither the Federal Reserve should be recognized as having some independent status, or it should be considered as simply an agency or a bureau of the Treasury.(U.S. Congress 1951, pp. 172–76)
Source: U.S. Congress 1951, pp. 172–7
And as an added bonus, we demonstrate that using the threat of Mutual Assured Destruction if politicians (coughhankpaulsoncough) don’t get what they want, the end is nigh. From president Harry Truman’s letter to Fed governor Thomas McCabe:
[W]e must combat Communist influence on many fronts.. . . [I]f the people lose confidence in government securities all we hope to gain from our military mobilization, and war if need be, might be jeopardized.”
I hope the Board will. . . not allow the bottom to drop from under our securities. If that happens that is exactly what Mr. Stalin wants.
Source: FOMC Minutes, 1/31/1951
By “Communist influence” and “Stalin” America’s 33rd president, Harry Truman, a “Democrat”, of course meant the US Treasury which needed to find, at any cost, a funder of only resort for what would one day become trillion dollar annual deficits, and the US banker superclass, which needed, at any cost, to have full control over the entity that would print US currency at will whenever the specter of deflation threatened to destroy all the accumulated equity-based wealth of the status quo.