(noun, etymology Dutch from ‘boedel’: estate, possession, inheritance, stock.). 1. Crowd, pack, lot, as in ‘the whole boodle.’ 2. a. Counterfeit money b. Money acquired or spent illegally or improperly, particularly when used in bribery for political purposes. 3. Slang for money in general.

Levitate the Federal Reserve

Posted on: Nov. 2, 2010  |  By: Ronnie Kahn  |  Category: General

If you remember a bunch of Vietnam war protestors getting together in Washington, D.C. to levitate the Pentagon in the 1970’s, you probably weren’t there. Or at very least, hadn’t drunk the same orange juice they did. In 2009, with unemployment officially near 10% and unofficially near 18%, the FHA nearing the red, retirement accounts down 40%, etc., etc., we’re in a new “conflict,” this one more obviously domestic and economic.   In 2010, unemployment still is around 10%.  In response, I’m calling for a new levitation. A levitation of the Federal Reserve.

As it stands, the Federal Reserve already levitates.  It does so by using monetary tools that affect all of our lives.  Whether you stand behind the job the Fed has done or whether you complain about their role, the fact is that it has an important influence on the economy and, therefore, our lives.

The Fed usually does whatever it does in the name of moving the economy forward.  They try to watch that inflation doesn’t get too high while trying to stimulate borrowing, which can effect businesses and, to a lesser extent, how much interest individuals have to pay on loans.  Right now, they are also trying to stimulate job growth.

It can be argued that the Fed is part of the “Free Market.”  It tries to allow the markets to move around and react by setting its policy and then staying out of the way.  Hopefully, The Fed can add some stability by stifling the effects of inflation or not letting us sink too much into the doldrums.  However, the “free” in Free Market is as much of an illusion as money itself.  Money is a collective agreement and nothing more.  Any policy the Federal Reserve sets still has influence and effect.  This means that the way they go about their “business” creates “winners” and “losers.”  This is always true of any market.  Social construction is part of the structure.  Any rules and regulations will tend to favor certain types of individuals or values.  For example, we subsidize home ownership through tax incentives on interest and real estate taxes or give charitable deductions to encourage helping others.  Our bankruptcy laws allow for risk-taking in the form of entrepreneurship since, if necessary, someone can start over again.  As it stands though, with politicians accepting so much money, the tax code is affected by those that can buy influence.

The Federal Reserve, like many institutions, groups, and individuals, likes to imagine they are massaging the economy and encouraging productivity.  Underneath, though, their actions are mostly about keeping shareholders in big corporations happy. Any policy is bound to produce greater benefits for some than others. The ostensible strategy of The Fed is to allow for stable growth.  They do so by massaging monetary policy and liquidity so that we do not grow too fast or too slow.  At the same time, it has been determined that the trick to this is to manage inflation which means that prices for goods and services also need to remain as stable as possible. This helps investors. But the flip side is that there is pressure to keep employee wages from rising too much (which could be inflationary). By their policy machinations, liquidity is affected, which means there is more or less money available for investment.  If the Fed performs their balancing act properly, businesses grow and consumers have money to spend on what those businesses are producing.  The driving force, however, for the Federal Reserve (as it is for corporations, investors, and even our government’s tax revenue) is share price.

The main impetus behind investments is not to pump money into new businesses and ventures.  Most stock transactions take place in secondary markets, meaning that the company no longer receives any direct money from investors unless that company holds some of their own stock.  The investors are just making money on share appreciation alone and this really amounts to nothing more than speculation.  The Federal Reserve’s job is to manage liquidity and monetary policy in order to manage economic growth especially through inflation with one of the main recipients being the price shareholders will receive for their stocks and in some sense bonds as well.

The Federal Reserve has an important affect on who has wealth for investments.  It can be argued that this levitation of share prices is an important player in the financial meltdown of 2008 and some other financial crisis before that. With the regulations of the market relaxed and allowing more and more “freedom,” the amount of liquidity pumped into the system allowed share prices to grow higher and higher while there was plenty of money to make the sub-prime loans that ignited the financial explosion.  This primed the pump for boom and then the inevitable bust.

It is ironic that the Federal Reserve’s former chairman was quoted on how dangerous “irrational exuberance” was, when his policies helped stimulate the growth that rewarded the few and not the many in the first place.  The problem, of course, is not to blame the Fed but to understand that it did create the gunpowder that other institutions lit. This then created a noise that one cow got scared of.  That cow panicked, and then another, and soon the whole herd was in a stampede without any idea as to why, other than the “fear on the range.”

What if WE collectively levitated The Federal Reserve, instead of the other way around? What if we asked for policies that did not only support individual achievement but also collective achievement?  Inflation is a concern in how it will effect consumption.  While this is still something that needs to be watched, what is becoming more critical with unemployment so high, is for all of us to shift resources into investments that can create new industries, business, and jobs.

You may think this is some unattainable ideal.  However, is it not just as easy to imagine that more of those who contribute to the value of our society have room to benefit more?  Stockholders are considered owners, yet what is it that they contribute to the mix?  Basically, their part is played by taking a risk with their wealth which is used to create more wealth.  Yet, why are we leaving so many others out of that mix?  Is that really the best way to commit to progress?  If we all trusted and believed that we could do better as a team then we can do as individuals, isn’t it in our best interest to work together?  As it stands now, with shareholder prices being treated as the only thing that makes the world go around, corporations treat employees as expenses which must be kept down and treat communities as a suitor that should offer tax breaks as compensation for what the corporation adds to that community.  The role of The Federal Reserve has been to find a middle way between sustainable growth and stagnation. But it needs to take a more proactive role by considering money flowing into the hands of entrepreneurs and new businesses, the middle class in the form of employees wages, as well as shareholder appreciation.  We can find a middle way between what is good for one and what is good for all.

Part of the levitation is to work collectively to do the right thing for the right reason. This increases reciprocity and ethical behavior which uplifts the group; and creates its own energy for levitating things in unforeseen ways.  Lifting, after all, is the very point of levitation.

Here is the formula for levitation (note that it doesn’t require funny orange juice):

RE + I(WE) + I(IT) + x

L          =          ___________________


RE stands for realistic expectations; plus actions an individual (I) takes that help others (WE); plus actions an individual takes (I) that help the world (IT); plus x, where x is an unknown mystery.  The bottom of the formula represents the inverse of if you always do, what you always did, you always get, what you always got.

Come on people now, get together….

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