This weekend I had a meeting which put me in town for a couple hours. It was the first time I have been in town in months and it brought home how much I miss working in town.
Working in the tech center is good. It is a relatively easy drive and the parking is plentiful, free, and conveniently located so close to the building. But there is no bus service (wanting as it may be) that takes me directly there. There were two buses a day from here to within two blocks of my office. Sure, they were twenty minutes apart and later than I would have liked to arrive, but they were here. It would take two transfers and a mile walk at the end to get to the office in the tech center - total transit time: 2 hours.
But it is the being downtown that I miss. I rarely ever leave the building in the tech center. There is no reason to; I would have to drive to get anywhere and there is nothing all that interesting to get to. In downtown, there is always something going on.
Take this weekend; there was a protest going on that I walked through after my meeting. It was sparsely attended and spread-out, but it was spirited. The leader of the (what? perhaps a dozen people?) group had a bullhorn and was trying to engage the largely blasé passers-by in the debate.
The scattered minions trying to hand me leaflets, the huge incongruous tea cup (I know what the symbolism is, but there was no reference to the tea parties held last week...), it all came together to give the protest a bit of legitimacy – even if the stuff the guy was shouting had no basis in reality.
His diatribe was a long and rambling assault on the administration cobbled together from right-wing demagoguery, amusing non-sequiturs, and outright fallacious comments. In the time it took me to walk the three blocks that I could hear the invective, I learned that the administration wants to invade and control our personal lives. That the president (personally) is a huge fan of (and presumably therefore wants to emulate) foreign dictators. And (my personal favorite) that the Federal Reserve Bank should be audited by us since we are audited by them.
The first two examples that I have stated (like much of the blathering tirade) are clearly opinion and as such there is no proof sufficient to persuade those who don't believe it and none will dissuade those who do. This last one, however, is so clearly based on ignorance that it is the reason for today's screed.
Okay, as we all should have learned in our civics classes, the Federal Reserve Bank (the Fed) has been around since it was created in 1913. Its sole purpose as to serve as the mechanism though which the US banking system can be maintained. The Fed came into being as a result of the Federal Reserve act of 1913 and is an independent agency which, through its board of governors, sets US Monitory Policy.
Through a series of twelve Federal Banks located in major cities around the country, The Fed facilitates the lending of money between banks, sets the Interbank Loan Rate, regulates and oversees the practices of banks, supervises the banking institutions to make sure banks remain sound, maintain the stability of the financial system, act as a provider to the US government in foreign transactions, and generally assure that money keeps flowing around the system.
The fed does not "audit" the public. On the whole, it has no dealings with the general public at all. Which, if the leader of the protest had bothered to walk a block over to the Denver Branch of the Federal Reserve Bank (located at 16th and Curtis) he might have noticed that there is no public entrance to the building. The one entrance that I have seen to the building is a secured (keycard) entrance for Fed employees.
The Fed is Audited. In accordance with the terms of the Federal Banking Agency Audit Act (enacted in 1978 as Public Law 95-320) the Fed is subject to regular audits by the Comptroller General of the US and the General Accounting Office. Since the GAO is an arm of the Congress of the US, and Congress is you (well, you represented by your elected officials) you do audit the fed, well… you do in the person of The Comptroller General and the General Accounting Office.
It is this "convenient" ignorance of the facts being spouted so verbosely on the street corners (and on certain news outlets which will remain nameless) along with the clearly centralized message, the repetition of the talking points of one side or the other, and the coordination of symbolism (which may or may not be apropos) that reveals this as what is it: the people who lost the election attempting to phrase their loss as your lack of input.
It is not as if the left didn't do the same thing eight years ago when they lost power… it is ugly no matter who does it. At least if you are going to become active, think about what you're saying before you go shouting slogans in the streets!
Wherever you are today, I hope you will take a moment to participate in the discussion of the issues important to you!
Don Bergquist – April 27, 2009 – Lakewood, Colorado, USA
4 comments:
Hi – I was wondering if I could get your opinion on something (it is related to your blog comments in that my question has to do with the Federal Reserve). I find it interesting that even though your opinion and my opinion are not always the same, we seem to be interested in the same sorts of topics.
This morning when I looked at the business and international news on my cell phone’s web browser it looked to me like the stock market was probably going to be down for the day (today is Wednesday, April 29th). There was a lot of news about joblessness (17 percent in some cities) and potential bankruptcies, etc. The Stock Market started up a little bit and then jumped very quickly and ended up over 2 percent higher. I saw a news item that said that the Fed’s optimistic comments about possible economic improvement had lifted the markets.
Late last year I was in the lunch room where I presently work and several people were watching George Bush talking about the economy on TV trying to calm people down because the stock market was in a big selloff at that moment. One guy standing next to me said, “you know, whenever that guy talks, the Stock Market goes down.” I had noticed also that the President was not able to calm the markets. But for some reason whenever Big Ben (the Chairman of the Fed) gets on the air, the markets immediately go up. I have become suspicious that maybe early every morning somebody at the Fed comes in and writes a spin story with scenarios for a potentially bright future economy just in case the market appears to be running out of steam and needs some help that day.
And I think that sort of thing might be what your “clueless” Denver Fed protesters sense is going on below the surface but are not consciously aware of (and are therefore not able to verbalize). And if it is true that the Fed does “spin intervention” whenever the US Stock Market goes down, then they are also affecting foreign markets, because whenever they prop up the US markets, the foreign markets seem to go up by about the same percentage that the US Stock Market goes up.
About a month ago they told the clerk at my local convenience store that they were going to cut out her Wednesday night shift because so few people were coming in because of the bad economy. When I went in there tonight there were several cars in the parking lot and at the pumps. There were a lot of customers in the store and she was there (she said that because of the increase in business they had asked her to start working Wednesday nights again). Do you think this is the result of Fed “spin intervention”? And if it is, would it not be in the long term destructive because it would be creating an artificial economy that is not built on solid fundamentals (and that it would also be building artificial economies in other countries that follow the example of the US)?
AR (another Fed Watcher)
Dear Anonymous Reader,
Thank you kindly for reading my blog and taking the time to post a comment!
Being of a somewhat eclectic temperament, I am naturedly interested in a variety of things. As for not always holding the same opinion I do, that makes it all the better. Variety of viewpoints is what makes discourse work. If everybody had the same view on things it would be like living on the Fox News Channel… Horrors!
I am glad you asked this particular question. A friend of mine and I were just discussing this very issue at the office the other day. I am leery of reports that any specific impetus was responsible for an increase or decline in the markets. From my, admittedly untutored, understanding of the market, it is not that easy. The market cannot be thought of as a homogenous entity which moves in response to any specific singular stimulus.
It’s not like when Saga (my Canaan Dog) who comes running every time I open the ‘fridge. There is no collective ribcage you can poke the markets in if you want them to flinch. Rather, the market is the largest pari-mutuel betting pool in the country. While there is the possibility that simple singular stimulus may be partly responsible for a specific action in the market, there are myriad other stimuli that could equally well be part of the reason for that reaction.
Granted, the more people who react to a specific stimulus, the greater the affect of that reaction, it is still simplistic to say (as I hear every night on the evening news) that “the market is down because…” That being said, stimulus like the president speaking has a lot greater affect on the markets than say my, personally, thinking it is a good time to get into the market. I’m just a guy – he occupies the Bully Pulpit.
If I understand your questions, they amount to this:
1) Do I think that there is merit to the merit to the idea that the Fed Chairman speaking can directly move the markets?
2) Do I think that here is some concerted effort to script the announcements he makes so as to directly affect the markets?
3) Do I believe that the protesters are, in fact – even if they cannot clearly state it, protesting this behavior?
4) Do I believe that the Fed Chairman’s statements can drive consumer cycles?
and
5) Do I think that these actions taken by the Fed (assuming they exist) could backfire and be detrimental to the economy?
Hmmm… Thought provoking!
There is a really good book titled The Wisdom of Crowds which discusses at length what the markets are and how they work. The main point of the book is that given a large group of people who have
Diversity of Opinion (The level of personal experience and information the individuals have varies widely across the sample set)
Independence (People are free to make what ever decision they want)
Decentralized Stricture (The individuals are not part of a rigid organization, they can freely associate with whomever they choose to and collect information from wherever they see fit)
A System of Aggregating Their Opinions (Some mechanism for turning the mass individual opinions into a single meaningful judgment)
such a group will make better judgments than any single person could.
The author sees the markets as a sort of aggregation mechanism for group wisdom. He points out that after the Challenger disaster (when the shuttle blew-up on launch) the market price of all the contractors of the aerospace sector went down almost immediately. By the end of the day, almost every one of the companies with one-or-two exceptions who were actual contractors on the shuttle were back where they were before the disaster. Within days, the only stock to still be down was Morton-Thiokol, the maker of the O-Rings that failed and were deemed to have caused the disaster. The markets had determined weeks before the experts studying the affair that was to blame is the inference from this story.
Given that, let me say that the following are my personal feelings:
1) Yes. There is probably some merit to the belief that the Fed Chairman (or the president or some sufficiently powerful person) can affect the markets.
2) No. I do not think that the Fed makes statements to directly affect the market (for the most part). I think it would be incredibly unwise to attempt to do so, any statement that is perceived as an attempt at manipulating the markets could easily be perceived as an attempt to do just that and may be seen as a sign of trouble; a cause for panic. And besides, I think that it may be unlawful to do so. …which is not to say that I don’t think the Fed Chairman’s words don’t affect the market. Obviously when the Fed Chairman makes statements like “the financial system is sound” or “the markets are stable” it will have an affect on the market.
3) It is possible that this could be what the protestors were protesting. I find it more likely the protest was a knee-jerk protest of the party who lost trying to make sure we all remember that they do not agree with the administration elected by a majority of the voters. The first one in years, if I am not mistaken, that was elected by a majority rather than a plurality of the voters.
4) I am sure he wishes he could. No. I think this is the general cyclical nature of our free-market society compiled with the unnatural peeks and ebbs of the cycle caused by the uncertainty in the mind of the consumer. Gas prices start to go up so everybody stocks up to beat the additional rise. They get so high nobody can afford to fill-up so they put it off… one can, however, only go without for so long before the supply is depleted… then people who have been putting off buying start replacing their stock… It the same with almost any commodity. When people start buying cars again (when the ones they have been driving for years wear out) there will be an irrational rush on them, we’ve seen it before.
5) If such a plan exists it is almost certainly doomed to failure. It is human nature. We cannot keep secrets. If the Fed has the plan to artificially inflate the markets by giving sunny reports on the economy and the stability of the banking system, the inevitable outcome will be that someone in the know will spill the beans or that someone will figure it out and “out” the fed. It is human nature.
Thanks again for your comments. Sorry for the long response. I do warm to a subject, though!
Don
Thanks again for posting and commenting on my response to your blog. The stock markets and the economy are definately complicated. And for that reason when the Fed makes a comment people immediately assume that they are taking all of the complicated pieces of the puzzle into account before they issue their statement. That I think is why people tend to trust comments from the Fed more than they trust comments from the President.
If there is a panic (like late last year) and if the Fed thinks that they can calm the markets by issuing a rosy statement, I think that anybody who has any sort of wealth and power who sees their wealth and power potentially slipping away would say "more power to them" and would not only not criticize the Fed but would in fact put a lot of pressure the Fed if they did not issue a rosy statement at that time. And if the employee who I suspect is ordered to write those rosy statements every morning thought about "ratting them out", they would think twice because they would know that when they apply for their next job and they are asked for the reason why they left their last job, the interviewer might be reluctant to hire them when they say that they "ratted out" (or "blew the whistle on") their former employer.
AR
Dear Anonymous Reader,
Thanks for reading and commenting on my blog. You may be right that the Fed may be doing that kind of thing. I would hope not, but who knows...
Let's hope that we've see the worst in the markets (regardless of the causes). My 401(k) can't take too much more if this!
Don
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