How the Federal Reserve Runs the Country
Although published on January 15, 1989, Secrets of the Temple: How the Federal Reserve Runs the Country
The author is not the ultra-conspiracy buff and he does not describe sinister (Wizard Of Oz) plots designed by the Fed. (I was hoping that he was and he did.) If you’re looking for an in depth banging critique of the Fed and you want the author to forcefully rip the villains apart, then you’re in for a disappointment. In fact, he really doesn’t explain the devious origins of the Fed. He views the Fed at a safe distance, but he doesn’t get into how the Fed was intricately designed. In all fairness, he briefly discusses the damage it’s created.
Readers will get educated about the Fed during the Carter years, and in doing so understand the power involved in the decision making process.
With that being said, Greider is witty, a good storyteller, and a very good writer. So, if you like history or economics you will not be discouraged. It is not like other dry finance books. Secrets Of The Temple is a delightful challenge. It’s all about supply side economics.
Even though his book is quite lengthy, Greider reveals many important facts unknown to many of us rookies and for this he deserves full credit. For example, the DIDMCA legislation needs to be examined.
It may not be common knowledge some decades later, nevertheless, further consolidation of the financial system was considered in the 1970′s and probably way before then. President Reagan ushered a new era for deregulated banking and President Bill Clinton expanded on the same policy, yet it was a financial statute passed in 1980 and signed by President Jimmy Carter that put the cornerstone in place.
It was called the Depository Institutions Deregulation and Monetary Control Act. This legislation gave the Federal Reserve greater control over non-member banks, thus forcing all banks to abide by the Fed’s rules. It also allowed for banks to merge and morph into too big to fail giants. Goodbye to the Savings and Loan banks. Hello to the S&L crisis.
The decline of the Glass–Steagall Act was initiated by developments from 1966 to 1980 and up to 1999, via court cases, regulatory interpretation, loopholes, and repeal. Critics argue that the decline of the Glass-Steagall has caused the financial meltdown in recent years.
In Part 1, Secrets Of The Temple, the author analyzes the Paul Volcker years (1979-1987) and his problem with inflation. Volcker, Chairman of the Fed, was appointed by Carter in 1979 and reappointed by Reagan. Greider does an excellent job of summing up the economic history of this era. This alone is worth the price of the book.
In Part 2, The Money Question, Greider evaluates the supposed successes and failures of the Fed. He appears to be apologetic, almost defending the Fed, especially in the chapter titled ‘The Great Compromise’. His work is written more on an academic angle , so one must take this into consideration. Again, this is not a conspiracy or an investigative book.
It is acknowledged that the banksters made “outrageous profits” financing World War I and now we see some dirt on the Fed. The author expands on this topic in a roundabout way. He avoids getting into a lot of details, but his explanation is sufficient if you already have a grasp of the development. It is implied that you do.
The part where the author excels is breaking down Keynesian economics to where a student of economics can clearly understand the post-war expansion that propelled the United States into global hegemony. Greider knows his economics and it shows. There are certainly critics of Keynesian economics but it’s good to know both sides of the argument.
“The theories forming the basis of Keynesian economics were first presented by the British economist John Maynard Keynes in his book, The General Theory of Employment, Interest and Money, published in 1936, during the Great Depression.”
The author’s words weigh heavily on his penetrating analysis concerning laissez-faire capitalism:
The Federal Reserve was, profoundly an important prototype for the modern liberal state. For the first time, a governing arrangement would explicitly mix public and private interests in a manner that was elaborated many times later in different ways. However inadvertently or reluctantly, the creation of the central bank committed the federal government to a direct role in managing the private economy, and, once involved, it could no longer pretend to be aloof. It was, in fact, the beginning of the end of laissez-faire.
