The Federal Reserve as Engine of Reverse Robin Hood Redistribution

The Fed really abandoned all pretense of being “independent” of politics in the aftermath of “The Great Recession” of 2008, although it continues on, with the help of its academic supporters, with the rhetoric and propaganda of “Fed independence.” Specifically, the Fed made it ever so obvious that its primary concern is protecting the bonuses of the Wall Street investment banking titans who, in turn, supply millions of dollars in campaign “contributions” to the executive and legislative branches and the two major political parties. (It is not just a coincidence that the U.S. Treasury Secretary is almost always a top executive at Goldman Sachs). The Fed does this by responding to bursted bubbles in real estate and stock markets, among other places, by pumping even more liquidity into the economy, thereby creating new bubbles—and new profit opportunities for Wall Street speculators. As David A. Stockman (2013, p. 653) wrote in his book, The Great Deformation, “[T]he central banking branch of the state remains hostage to Wall Street speculators who threaten a hissy fit sell-off unless they are juiced again and again. Monetary policy has thus become an engine of reverse Robin Hood redistribution; it flails about implementing quasi-Keynesian demand-pumping theories that punish Main Street savers, workers, and businessmen while creating endless opportunities . . . for speculative gain in the Wall Street casino.” Thanks to the Fed, the machinery of the state and the machinery of reelection have become coterminous, says Stockman.

Monetary inflation enriches the “one percenters” on Wall Street while impoverishing just about everyone else. By deterring savings with its policy of artificially lowering interest rates the Fed destroys much of the essential ingredient of economic growth—savings, investment, and capital accumulation.

--Thomas DiLorenzo, "A Fraudulent Legend: The Myth of the Independent Fed," in The Fed at One Hundred: A Critical View on the Federal Reserve System, ed. David Howden and Joseph T. Salerno (Cham, CH: Springer International Publishing, 2014), 69-70.