In 1913, Woodrow Wilson (see portrait above) signed into law the Federal Reserve Act. The new law allowed for the creation of a central banking system. What does this have to do with socialism and why would I be writing about this in the middle of the current economic strife here in the US?

Not surprisingly, there has been a lot of writing (and blogging) about our economy. I've written about it a lot over the years, but most recently I blogged (here:…he-bailout ) about why I'm against the bailout, mainly because it breaks our own rules. After that, I blogged about why it's bad to break our own rules (here:…onable-man ), basically explaining that breaking our own rules makes us look like untrustworthy liars and it makes our laws look like jokes.

But in that last post I just linked to, I commented about socialism. People are accusing the USG of practicing the "S" word in bailing out Wall Street. I said that those accusers are both right and wrong. Effectively, they're right, but literally, not exactly.

Here's where the Federal Reserve comes into it.

The $700 billion the USG wants to give Wall Street will need to be borrowed before it can be gotten from We The People in the form of taxes. All banks and the USG borrow money directly from the central bank--the Fed. Now, the Fed is under no effective control of the USG. We don't vote for a single person who works for the Federal Reserve and the Fed's chairman is appointed the president for 14 years. (!)

In any practical sense the Fed is not a government agency. As a result, we can consider them a private organization. I've heard some say they are a legal corporation, but I haven't seen proof of this.

So, since the Fed is private and the USG is borrowing money from them, effectively, the Fed is bailing out Wall Street, not the USG. So, really, it's corporatism, not socialism.

But it sure feels like it's socialism, doesn't it?

Now, that's the nutshell. Not surprisingly, I have a lot more on the Federal Reserve loaning us money to bail out Wall Street and how the Fed is private. If you're interested, head over to I've got a more complete version of this post there.

Effectively, though, I've made my point.

Isn't that funny? I keep having to use the word "effectively" because all this money stuff is so stupid and vague there's nothing tangible about it--just like our currency. If only we had a gold reserve... :(
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