A Taboo Subject: The Federal Reserve And Black America
I have just finished reading Bob Woodward's book on Alan Greenspan entitled, Maestro. I recommend the book to anyone seeking a relatively easy to understand overview of the Federal Reserve during the Greenspan-era. The book is not overly technical and is so well written that it might hold your attention long enough to finish it in a single quiet weekend. As I neared the end of the book, I began to think over why it is that the Black community is so unaware of how it is affected by Federal Reserve policies and the decision-making of its chairman, Alan Greenspan.
At BlackElectorate.com we are convinced and have written about the fact that Greenspan and the Federal Reserve subscribe to theories and implement policies that actually institutionalize a permanent level of unemployment in this country, which hurts Black America the most.
The Federal Reserve subscribes to the Phillips Curve theory, which equates high employment rates with inflation. This correlation causes the Fed to believe that if too many people find jobs that the economy will "overheat" and cause inflation to shoot through the roof.
But the Phillips Curve ideology has been disproved by this current era of virtually undetectable inflation and low unemployment, yet the Federal Reserve still adheres to this archaic notion that too much employment is a bad thing.
And, despite mainstream media reports to the contrary, we are positive that Greenspan's mismanagement of US monetary policy, specifically over the last four years, has actually hindered wealth creation in the United States, particularly within the Black community.
Yesterday, we wrote of how Alan Greenspan's refusal to target the price of gold and inject liquidity into the US economy has negatively affected Black-owned publicly traded firms the most who, on the margin, and due to their small market capitalization, have the greatest need for capital investment.
On an international level, we are certain that Alan Greenspan and the Federal Reserve are responsible for the worldwide monetary deflation beginning in 1996 that depressed international commodity prices potentially hurting Africa more than any other continent on this earth.
Incidentally, we have editorialized that Greenspan's deflationary path has injured Black Farmers in America more than any other group of farmers when one considers the oppressive regulatory burden and discriminatory practices these Black farmers have and still receive from the US government.
I personally made this argument to the US Secretary of Agriculture Dan Glickman in September of 1999, in front of an audience of Black farmers.
But in our public criticism of Alan Greenspan and the Fed we are a minority within Black media, which for the most part has given Greenspan a free pass over the last eight years if not outright praise for his management of the economy.
And partly because Black media has not offered an honest critique of Greenspan's policies, the Black electorate has had absolutely no internal debate or discussion regarding its relationship with the Federal Reserve - past, present or future.
After finishing Maestro, I considered a variety of factors, not all, just a few, that contribute to this disconnect between the Black electorate and Alan Greenspan.
The first factor I considered was the general lack of education in the public school system on the subject of economics. I remember that it was not until my senior year in high school that I received any formal instruction on the subject and even that was only for six weeks in a course that emphasized business management.
It was not until I reached college and took my first course in macroeconomics that I can say that I became familiar with the subject and the Federal Reserve in particular. Having said that, I can honestly tell anyone that even during my college years, I learned more from my daily reading of the easy-to-understand business section of USA Today than I did from the numerous textbooks on the subject that I was confronted with at the university level.
But an important point to consider is: If a young Black male or female does not go to college when will they ever be "taught" about economics and the workings of the Federal Reserve system?
The second factor contributing to the disconnect I suspect, is the lack of prominent Black economists with a relationship with the Black grassroots and with visibility in the Black community, who can provide a cogent explanation of how the Fed works that doesn't cause a person's eyes to glaze over or roll in the back of their head.
And a third factor, I believe, is the lack of a cadre of Black politicians who comprehend the subject of economics and monetary policy and who make the subject a legislative priority - in the interests of the Black community and not simply the interests of the banking and corporate establishment who make campaign contributions.
If there were a consistently strong and vocal Black political advocate on the subject, particularly in the US Congress, the Black electorate would have a representative on the front lines of US economic and monetary policy who could educate and advocate on behalf of an entire community.
The closest we have come to such a politician was Andrew Young former Congressional Black Caucus member and Mayor of Atlanta.
Of the current members of the Congressional Black Caucus, Rep. Jesse Jackson Jr. (D-Ill.) and Rep. Melvin Watt (D-NC) show the most promise of challenging Greenspan in the interests of the Black electorate.
To this end, we at BlackElectorate.com hope to fill some of this gap and confront some of the factors that have contributed to an entire people, in general, being woefully ignorant of an important subject- US monetary policy; an important institution - The Federal Reserve; and an important man- Alan Greenspan.
For anyone interested in getting a mastery of these three subjects we recommend a six -book syllabus that one can read at their own pace, whether it takes one a few months or a whole year.
We recommend that you read the following books in the following order:
1) Maestro by Bob Woodward. This book provides an easy-to-read overview of the Greenspan era. It deals with the Federal Reserve Chairman's thinking process, personality and decision-making, particularly the manner in which he builds a consensus at the Fed. The book does an excellent job of showing how the Federal Reserve intersects with the American political establishment.
2) Secrets of The Temple by William Greider. This book deals with it all - the political forces, economic theory, and the historical evolution of the Federal Reserve as an institution. The book excels at explaining the mechanics of the Federal Reserve - how it works.
3) The Way The World Works By Jude Wanniski. This book provides the best explanation of how Richard Nixon's decision to take America off of the gold standard and the Federal Reserve monetary policies of the 60's and 70's caused a worldwide inflation that the world has still not recovered from. It also provides the best explanation/definition of inflation that one can find.
4) Secrets of The Federal Reserve by Eustace Mullins. This book deals with the "sinister" aspects of the Federal Reserve -its private ownership, and the negative impact the institution has had on the US economy. It also places a rare spotlight on an elite few who have profited from their influence overUnited States monetary policy. This book very clearly depicts the Federal Reserve as a congress of elite bankers who historically have exerted an undue influence on the US economy - and profited from it.
5) The Secret World Of Money By Andy Gause. This book is an easy-read that takes you deep into the history of money in America and some valuable but little-known facts about the Federal Reserve and the US Treasury. It articulates, very clearly, the tensions that have existed between American politicians and the idea and reality of a central bank, beginning with Thomas Jefferson
6) The Greenspan Effect by David B. Sicilia and Jeffrey L. Cruikshank This book unfortunately had to be written. It is a guide to understanding what the hell Alan Greenspan is talking about when he uses those big words and makes those long-winded sentences. Greenspan is a master at double-speak and obfuscation and this book helps the reader to understand what he means in what he says and what he means by what he does not say. The book was written by two authors who have read every public speech that Alan Greenspan has delivered and who have a great understanding of how his mind works and who have developed an ability to "interpret" him.
We guarantee that anyone who reads these books will have developed a mastery of the Federal Reserve and the Greenspan era and will be able to clearly think about the direct effect that this institution and this man have had upon the economic fortunes or misfortunes of Black America.
Wednesday, January 10, 2001