On December 23, 2013, the Federal Reserve will celebrate its 100th birthday. No other government entity with a working website has as great an effect on the everyday lives of the masses as does our central bank, but yet it is one of the agencies least understood by the average shoveller. Indeed, many of the inhabitants of "flyover country" think Federal Reserve is a brand of whiskey.

As the centennial of this glorious people's institution approaches, let us take this opportunity to peer a little deeper into its vaults.

Congress created the Federal Reserve system in December 1913, a date coming coincidentally between the sinking of the Titanic in April 1912 and the start of World War I in July 1914.

The Fed's original purpose was to deal with a financial panic caused by the so-called "herd instinct," as envisioned by the legislators who viewed investors as livestock: when a portion of market participants sell assets and drive prices down significantly, the remaining participants are "stampeded" into doing the same thing out of fear of getting stuck holding worthless securities.

Federal Reserve's intent was to quell these stampedes by addressing market concerns in such abstruse and long-winded terms that many of the panicking investors would be put to sleep and the rest would become so preoccupied with trying to understand what the Fed was saying, they would forget to sell their assets.

Indeed, in actual practice, this idea worked very well - even too well. After the stock market crash of October 1929, the Fed put investors into such a deep sleep, they did not wake up for a number of years. When they finally did awaken, they were too groggy to buy or sell anything. This era is now known as "The Great Depression."

Seeing how well their creation worked in fixing panics, over the years the Congress decided to add other mandates to the Fed's charter. Most famously, the Fed was tasked with stimulating economic growth and increasing private sector employment.

To deal with these assignments, the Fed endeavored to greatly increase the opacity of its language, the idea being that the impenetrable jargon would force investors and businessmen alike to hire loads of high-salaried experts to translate what was being said into English.

The Fed's theory was correct: a whole new class of economic translators was created, who, in turn, required people to drive them around, cook, clean their mansions, etc., so they could devote all their attention to reading the Fed's statements. This led to increased economic activity, as the newly-wealthy experts required cars, kitchens, and brooms for their staffs to drive, cook, and clean.

Over time, the Fed found it could control the economy almost at will. Once stimulated, if the economy became overheated, the Fed could cool it off by speaking more plainly, causing fewer experts and support staffs to be needed.

The great economist John Maynard Keynes was said to get so excited at the sheer impenetrability of the Fed's stimulative statements, it was rumored that he would often disappear for a while to read them "in private." That is why the Fed's efforts to energize the economy are alluded to as "Keynesian stimulus"; it is also said that Keynesian stimulus usually results in inflation.

Today, with a century's worth of experience to guide it, the Fed has rhetorical weapons that the central banksters of 1913 could not even dream of (even if they fell asleep while reading their own statements).

The Fed's most powerful economic superweapon, which some also call "weapon of mass delusion," was invented in the aftermath of George W. Bush's attempt to crash the world economy in 2007 so he could deny abortions to the world's poor womyn. The name of this superweapon is "quantitative easing."

I recently hired an expert to tell me exactly what "quantitative easing" is. The explanation was rather simple: the Fed is going to buy up all the US Treasury bonds there are in order to force old people to go to casinos to make any income. That sounds innocuous enough, but yet the mere mention of the phrase to any large mutual fund manager or executive of any bank or insurance company causes that person's eyes to glaze over as if mesmerized, after which they immediately start buying up any stock, junk bond, or casino they can find.

Ultimately, this phrase and Barack Obama's Keynesian stimulus has been the only thing between us and the pitchforks since 2009.

And yet, in spite of its successes, most of the great unwashed today have no idea what the Fed actually does. For example, the Fed recently started wielding its latest languo-weapon, "tapering." On my way to hire an expert to explain it to me, I stopped at a beet field and asked one of the contented workers if he knew what "tapering" was. He replied, "I think it means Federal Reserve is going to put less alcohol in its whiskey. Hic!"

Happy Birthday, Federal Reserve. Hic!

Thank you for this lucid description of a most difficult subject. As I've told this young prole again and again, government tapering is for your own good. But does he listen? No. I will have him read your article when he sobers up.

Well, at least your little " nut job " friend is drinking a decent beer !

It would be easy to make joke about "tapering" being indeed necessary after much stimulus and inflating ... but I do not make such jokes. (blush)

One way or another, however, the Fed manages to screw penetrate economy, no?

I do not understand problem with Fed language. According to such prog philosophers as Derrida, language has no meaning anyway.

Opiate of the People wrote:The Federal Reserve's intent was to quell these stampedes by addressing market concerns in such abstruse and long-winded terms that many of the panicking investors would be put to sleep.

Little wonder. Just take a look at its seal. Look closer. Don't avert your eyes. Keep looking. That's right. You feel warm. You feel calm. Everything is going to be alright.

Quantitative easing is a universal principal with predictable results. For instance, the more crap being spewed by any given administration or bureaucratic office, the less value that crap has. On the other hand, the pile of crap, being so much larger than before, appears to be more valuable.

ThePeoplesComrade wrote:Quantitative easing is a universal principal with predictable results. For instance, the more crap being spewed by any given administration or bureaucratic office, the less value that crap has. On the other hand, the pile of crap, being so much larger than before, appears to be more valuable.

Stop complaining and grab a paddle, comrade!

Irrational Exuberance.

Only capitalism has irrational exuberance, comrade. Socialist exuberance is totally rational. And scientific!