Fed's secrecy policy 3 years old

WASHINGTON – As America's economy continues in freefall, tomorrow marks an auspicious three-year anniversary – the day the Federal Reserve announced, with little fanfare, its decision to stop reporting to the public the M3 money supply, the broadest measure of three standards of measurement.

Federal Reserve is the non-government agency designated by Congress to control the nation's money supply, which directly impacts the value of the dollar and every investment held by Americans.

Since 2006, Americans have seen their investments plummet in value and witnessed the shrinking buying power of their earnings.

Why did the Fed make that decision three years ago? What was its rationale?

The justification for the secrecy by the organization that prints money was cost. By not producing those numbers for the public, the Fed would save about $1.5 million annually.

According to Jerry Robinson, author of the new book "Bankruptcy of Our Nation," the $1.5 million savings by the Fed amounted to 0.00000699 percent of it annual net income of last year.

"You would think that such a broad economic and inflation indicator would be continually produced, analyzed and monitored," says Robinson. "However, when the announcement came, it fell on deaf ears. This bold new move by the Fed caused some stir among economists, but it never received any real media coverage."

Just last Wednesday the Fed said it would flood the teetering financial system with an additional $1.2 trillion.

The money will be used, the Fed said, to buy government bonds and mortgage-related securities in hopes of lowering the borrowing costs for home mortgages and other types of loans, thereby stimulating economic activity. In other words, the central bank will print more money to pay for the purchases.

What the Fed does not explain publicly is how those kinds of infusions of money out of thin air, with nothing to back it, reduce the purchasing power and assets of all Americans by devaluing the dollar. The $1.2 trillion is in addition to hundreds of billions already added to the system since the beginning of the year and dwarfs even the biggest government bailouts to date.

The decision was seen as an admission that the economy is much worse than it had forecast at the board's last meeting in January.

Robinson predicted such moves in his new book. He saw the March 23, 2006, announcement by the Fed as a predicate to unprecedented emergency manipulations of the financial system in the future.

"You would think that there would have been some public outcry over the lack of transparency," he said. "But the average person has no idea what M3 is, and it is probably just as likely that they do not care."

Robinson says he was not surprised by the decision of the Fed two years ago to keep information about the expanding money supply from the very people it impacts. He says the Fed has never been known for its "transparency."

"Instead, it is an organization shrouded in secrecy," he writes in "Bankruptcy of Our Nation."

He points out it took from 1776 to 1983 to grow the M3 money supply by $2.5 trillion. But the supply increased by $2.5 trillion in the next 14 years. And then from 1997 to 2001 – only four years – it increased by that amount again.

"While the Federal Reserve has become less transparent in its actions than ever, we do know that right now, the printing presses are rolling and that the Federal Reserve is injecting massive amounts of currency into the U.S. economy," he explains.

Scarcity of currency, he writes, stabilizes its value, but overproduction reduces its value.

"And as the value of the dollar falls, what does that do to the prices of consumer goods?" he asks rhetorically. "It drives them up."

The Fed last week took consolation in a slight stock market rise in answer to its announcement about injecting $1.2 trillion more into the system. However, Robinson points out that rising stock prices don't actually mean increased wealth for those invested in those companies – simply because the dollar is not worth what it was before the infusion of capital into the system.

Robinson says the actions of the Fed can only serve at best as a temporary fix – placing a Band-Aid on a severe laceration.

"And it will only serve to delay and enlarge the scope of the impending day of reckoning for the United States," he adds.

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