American Thought Leaders - Jeffrey Tucker: Everything You Need to Know About the Fed

Episode Date: September 6, 2025

In this episode, Jeffrey Tucker unpacks President Donald Trump’s growing dispute with the Federal Reserve and his efforts to remove Federal Reserve Governor Lisa Cook for alleged mortgage fraud.“There’s a lot more at stake than just this one regulation about residences and mortgages. It has to do with whether and to what extent the Fed is actually accountable to the President of the United States,” says Tucker.He’s the founder and president of the Brownstone Institute and senior economics columnist for The Epoch Times.How did the creation of the Federal Reserve fundamentally change America? Does Trump have the authority to fire a Federal Reserve Governor? And what does it really mean to be an independent federal agency?“What’s striking to me about this is that the Fed has been around since 1913. This question has never really been asked at this level—much less answered—for all these years in this country,” Tucker says.Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

The law is written by Congress, the implementation legislation of the Fed, says that the president can fire a Federal Reserve Board Governor with cause. In this episode, Jeffrey Tucker unpacks the recent controversy surrounding the Federal Reserve. He's the founder and president of the Brownstone Institute and senior economics columnist at the Epoch Times. No president since 1913 has taken on the Fed the way Trump is taking it on now. And the Supreme Court, I think, is going to have to decide. How did the creation of the Federal Reserve change America? Does President Trump have the authority to fire a Federal Reserve governor for alleged mortgage fraud?

And what does it really mean to be an independent federal agency? What's striking to me about this, for all these years, this question has never really been asked at this level, much less answered. This is American Thought Leaders, and I'm Yanya Kelleck. Jeffrey Tucker, so good to have you back on American Thought Leaders. My pleasure. Good to be here, Jan. Let's start with this recent firing of the Federal Reserve Governor Lisa Cook. Is this something that can happen? This is something that's wildly contentious in our, and it's seemingly in our society,

and people are coming in on either side. What's your take? Well, she refuses to resign, believing that it can't happen, that she's untouchable in some sense, so the president cannot do this. The problem is that the law, is written by Congress, the implementation legislation of the Fed, says that the president can fire a Federal Reserve Board Governor with cause. Right? That's what it says, which implies that the president is in charge.

It's the president is what keeps the Fed accountable. Now, Trump believes this, and so he found somebody on the board that he can fire with cause. Now the allegation, I have to say allegation because that's the way we talk, but actually it's true. She named two separate primary residences in her mortgage applications. You can't have two primary residents, these residences. The advantage for doing that is that you get favorable interest rates because on your primary residence is less risk. So you get a more favorable loan rate.

So she got two favorable loan rates. And then you've got really interesting problems concerning the deductibility of interest. You can only deduct the interest that you pay on a loan from your primary residence. If you buy the second, third, and fourth house, that's, you know, on you. So actually, this is a federal crime to do this. And maybe it's common. Maybe it goes on all the time. We don't really know.

Maybe there's a certain class of borrowers who just do this routinely. Lisa Cook treats it like it's no big deal, like a parking ticket or something like that. But it's actually a federal crime. So if you're looking for some reason to go after a Fed board governor with cause, this is a good cause. So I think Trump will prevail in this particular case, but it will have to be decided most likely by the Supreme Court. What's important here, Yon, there's a lot more at stake than just this one regulation about

residences and mortgages. It has to do with whether and to what extent the Fed is actually... accountable to the President of the United States. That's what's at issue. What's striking to me about this is that the Fed has been around since 1913. This question has never really been asked at this level, much less answered. For all these years, this country, we've pretended as if there's such a thing as an independent central bank, and everybody knows what that is. Well, there's another word for

independence. That is unaccountable, right? Independence sounds great, unaccountable sounds bad. Well, the Fed's unaccountable. They've not been held to account for any outside audits in its entire history. Any political intervention is widely seen by financial markets as something like a catastrophe, you're risking the nation's financial stability, and so on, so on. But, you know, in the end, we are governed by this document called the Constitution, and we're a nation of laws. And the Constitution has three buckets. It has judiciary, has a legislative branch, and an executive branch.

In the org chart of the federal government, printed by the federal government that everybody agrees is true, the Federal Reserve is under the executive branch and reports to the president. You can see it. The org chart is very clear about that. You can say it's independent. Well, is that just sort of a norm that we just have a hands-off policy? Well, this is what I was going to ask because, you know, certainly in the judiciary precedent is hugely important. It impacts a great many things. Is that the case here? Because clearly, as you've outlined, the precedent has been, you know, independence. So we don't really know in a constitutional sense what that means.

And you'd think that we did, we would know, but we don't actually know what it means for there to be an independent agency under executive department. What's exciting about the times in which we live is that we're finally getting answers to these questions. The Supreme Court's been very clear up to now that the president, is in charge of the agency, it's executive agencies. So let's just say the Department of Labor, or USAID, or Department of Energy, Department of Agriculture,

or HHS, they can, in fact, fire employees. Now, five years ago, we didn't know the answer to this question, right? I mean, I think we've had these discussions for a while. We didn't actually know whether the president was really in charge of executive agencies. The Supreme Court, in a series of cases, has been very clear the president is in charge of executive agencies, but we know Trump.

That's great, but now Trump is taking on the great question of American life, which is the status of the Federal Reserve under the law. That is an unanswered question. So this is a taboo topic. We've never been here before. No president since 1913 has taken on the Fed the way Trump is taking it on now. And the Supreme Court, I think, is going to have. have to decide that this is an executive agency.

And maybe, give me a little background here. Why, for those that are uninitiated, why would the president feel right now that he needs to take on the Fed? Well, President Trump's annoyed the Fed because he thinks that they're keeping interest rates too high. Now, you can agree or disagree with that. I happen not really to agree with that.

But I do agree that you need some accountability for the central bank. I mean, you can't just have this floating financial institution. Arguably, the most important institution in the United States, the most impactful institution in the United States. And by extension, the world. Yeah, that's right. The globe, because we're on a world dollar standard.

So the Federal Reserve is the most powerful institution, arguably, in the world. And it's just this free-floating agent out there that nobody knows to whom it reports, if it reports to anybody. Under the Constitution, you know, the founding fathers were not idiots. They knew, you know, they knew the monetary issue was an important issue for any country. But they addressed a lot of things in specifics in the Constitution. They addressed copyrights and patents. They addressed even, you know, like the post office.

They address all sorts of specific issues. But trade, for example, is in there. But one of the issues they address in Article 1, Section 8 is the money power and they specifically grant to Congress the job of coining currency

to managing currency and coining money so that belonged to Congress well very quickly after and that's for a reason because they understood the monetary power is quite frequently abused by the executive

kings coin clipping You know, there's hundreds, thousands of years of abuse of the monetary financial system by big-shot executives, whether it's pharaohs or kings or princes, whatever. So they wanted it to belong to the Congress, which is to say the people. That was a specific decision made for a specific reason. It's very wise. And they also even restricted the states from making anything other than gold and silver as money, because they wanted to. to mitigate against the problems of inflation,

depreciating currency, because they knew this had led to upheavals in the past. You can read the Founding Fathers on money. They had a lot of views on this topic. Thomas Payne's most famous for having written common sense and railing against the ermine robes of King George, whatever. But actually, he has a lot of writing on the monetary question, too. He hated paper money.

He said paper money was the source of great evil that leads to inflation, and business cycles, trade cycles of booms and boss. He had very sophisticated economic understanding. And I'm not saying that Tom Payne was some sort of unique figure. This whole generation understood that bad money can ruin a country and a society and send their entire culture into upheaval.

So they wanted sound money, and they wanted hard money, and they wanted the money to belong to the people, guarded by the people for the people. That's why they had in Article I, Section 8, they granted to Congress the power to coin money and restricted even the states. Now, we had a 10th Amendment, so states have a lot of rights, but they did not have the right to create paper money.

That's in the Constitution. So that's how serious they were about this topic. Now, soon after the founding, there was an effort to create a national bank. And it didn't last long. Now, keep in mind, when we say, so we had the first national bank and the second national bank throughout the 19th century, in the first half of the 19th century.

Keep in mind, a national bank is different from a central bank in important respects. A national bank is really a bank for the government. It's like Congress makes debt. The national bank buys it and holds it, maybe prints money to buy the debt. And so they have this relationship. relationship between the bank for the government and the government has its own bank.

I mean, that's the national bank. Now, famously subject to all sorts of corruption, as even from my description. Bond rackets, debt scams, profit-get spending, there's bad stuff associated with national banks. And so it was kind of inconsistent with the American ethos. This is not a central bank. It was just a bank for the government, that's what it was. And so it went away, then it came back, and then it went away again.

Andrew Jackson famously railed against it as a monster, you know. So this is a lot of the debates about money in the first half of the 19th century surrounded this issue of the national banks. So then we had a long period of what's called free banking. It lasted for many years, and there were changes in the kind of regime that the relationship of the Treasury to the money, what we're going to have money, we're going to have a gold standard or silver standard, bimetalism. There are all sorts of acts coming out from Congress regulating this stuff.

But during the, you know, the 1870s and the 1880s and the 1890s, we had growing outrage against what was called wildcat banking. So we had the railroads going through the country, and everywhere the railroads went, property values would rise, and business would start popping up. And of course, banks popped up at that area, too. And they started lending money to everybody. And that if the railroad failed or didn't actually

show up at all, the banks would go belly up and take everybody's deposits, and people get angry. So that was called wildcat banking. lots of booms and bus. Banks were regarded as normal institutions. It's like grocery stores or newspapers or just another market institution. They could fail.

They could succeed. But it was determined by the markets. Now, that's a little fraught from the depositor's point of view. You can't know for sure. You've got to pick well. Yeah, you got to pick well. But there was competition between banks. And bad bankers went out of business.

good bankers thrived. I mean, it's a kind of a decent system overall, but maybe not incredibly popular for people who's lost their deposits, that sort of thing. But there's a lot of pressure during this period to stabilize the institution. You know, something that just strikes me, Jeffrey, I can't help but think that in a society that's

very focused on safety, that prioritizes safety, this is something that really wouldn't work in the kind of society that we're in today, for example. Yeah, even in the world, it was an unusual situation. America had a uniquely free system. There were other examples of free banking in this period of history. But America had a pretty darn free system.

It was imperfect, but it was pretty good. No real guarantees, at least not from the center. So it was pretty good system. And look, you have to grant that whatever, you can complain about the system. But it actually was a kind of handmaiden or shepherd of the greatest period of growth in industrial history, really. What happened to the American economic structures

between 1860 and, say, 1910, was a marvel for all the world. It was during this period where we got the commercialization of steel. We created new cities with skyscrapers. We had sound recording and photography and flight. and electricity, lighting up homes in cities, and communication, telephones. It was just the most marvelous period of invention

and expansion of incomes, a democratization of prosperity that we saw in America, made America famous all over the world. I mean, in the second half of the 19th century, there was a growing sense in the entire planet Earth, that whatever America was doing, they were doing it the right way. Democratization of prosperity.

I love that term. Well, all the incomes are rising. And across all classes, you know, it's not like the tales that you hear from the Gilder Age, which the rich got richer and the poor got by the, no, I mean, all the data shows that everybody was growing wealthier systematically. Yes, some more than others, but everybody was better off.

And the monetary system we had was free banking at first, and then we had. We had a codified gold standard after the Civil War. That was a government imposition. The beautiful thing about the gold standard is it restrained congressional spending. There was no ability to print. The existence of physical gold restrained credit expansion.

It put money in the hands of the people. Gold and silver circulated among the people. So this was a hard money country. You know, gold coins dangling in your pockets, you know, and banks. If they were issuing notes, which they did, they would keep gold in their vaults. And it was a good system, it was a brilliant system.

Remarkably, during this period, after the gold standard, and then all the way up to, say, 1910 or so, what happened to prices? Well, the value of the money gradually grew. I mean, imagine that. You save money, and then after five years, you go back to that money that's in your mattress, and you find that it's more valuable than it was

when you put it in, right? That's a remarkable thing. We call that deflation now. But at least under the gold standard, it meant that the propensity to save was, even apart from the interest you earn, you would be rewarded for your prudence, for your frugality.

And so America became a country of frugality and saving. Saving was always rewarded. Prosperity, invention, creation. I mean, it was glorious. It's no wonder. You know, by the 1890s, almost all of European politics that, you know, we've tried the aristocracies,

we've tried our monarchies, we've tried our kings and queens and multinational big shots running everything in our empires, but let's face it, we're all going to eventually be Americans. Look at what they're doing over there. And so this experience really did inspire the entire planet Earth. And America was never more confident

than it was under the gold standard in those years. It was also in these years that we developed all of our civic pride. Stories of the founding fathers, our national holidays, the music that we associated to marches and the flags and the signs and symbols. American pride, and you could say even patriotism, was born during this period and for good reason. And I guess my point is that this is all very interesting, but that the monetary regime

being hard money, money belonging and to and controlled by the people and by independent enterprises was a major reason for that. So now, we have to fast forward to the Fed because that's where things really began to change. And so, you know, this is now we're talking about 1913. And so just very briefly, why? Well, a lot of it had to do with the panic of 1907. But like in all politics, sometimes the crisis is exaggeration. for a reason.

But there was something like a frenzy after 1907. We can't stand this system anymore. Ops and downs and bank failures and panics. And oh, we don't know if the money is there. This is a problem. We don't know if the debt holders are even going to be paid. We need to bring science to monetary policy. So one of the things that was

part of the ethos of the time. You could look at the prosperity that unfolded over those 30 or 40 years and say, that's a miracle of entrepreneurship, enterprise, and freedom. Or you could look at that and say, wow, this is a consequence of good managers, excellent engineers, excellent science, the primacy of rationality over randomness.

There's two interpretations you could give. So as time went on, that second interpretation prevailed. So there's a growing sort of valorization of expertise and management. And they said, look, we should bring the spirit that's given us all these great inventions in the private sector to government itself. Let's put the experts to work on banking and money.

And the experts did come together, famously at Jekyll Island, and put together this new institution. It's a funny institution with a funny name because it's actually not a national bank. Yes, it is a national bank, but it was more than that. It became a kind of regulatory cartel owner of all banks in the country. So you could not be a bank unless you were a member of the Federal Reserve. Federal Reserve was going to be responsible for all clearing systems. How we got paid, when you finally get the thing that you're going for them, when the money arrives at the institution that it's intended for, that's called clearing. And that was going to be entirely charged by the Fed.

That was entirely managed by the Fed. And so there wasn't going to be any, no more wildcap banking, no more independent bankings. Banks were not going to be this free enterprise operations with this pop up and go away. No, no. It's all going to be controlled by the Fed. So it was both a national bank and a private banking cartel granted special rights by the federal government. So it exists in this strange place. And that was in 1930s.

How is it private? Well, it's entirely privately owned. I mean, these are privately owned banks. They're privately owned banks with a federal charter from the government. The banks being all the members? Yeah, well, all the banks are privately owned. Sure. Yeah.

And so it's a private cartel. It's like the banks, the biggest banks, leaned on Congress to codify a centralized system that would retain their private status while forbidding competition from outsiders. from wildcat banks and random people. So the system itself is kind of, is privately owned, or you could say it's a quasi-public private. I don't know what to compare it to. I'm sure there's a good comparison there.

Well, clearly the board of governors is not private. Right, that's right. So this is where we get into a lot of ambiguity. So this is where it gets really interesting. Is it public or is it private? And if it is public, who controls it? The voters, Congress, Supreme Court, the president, who? What does it mean to be an independent agency?

We know from the Supreme Court that these don't really exist in other areas of federal bureaucracy. We know now that the president's in charge of them, well, what about the Fed? That was always ambiguous in the law. So what happened was, this is the way it's normally described, Congress decided, in its its wisdom to take its powers over monetary matters, Article 1, Section 8, and delegate those to this new institution called the Federal Reserve. Now, you should just reflect for just two seconds, you know, you and I are both interested in words.

The word Federal Reserve is by itself funny because it doesn't say central bank. Americans hated the idea of a central bank, because that was more like Germany and at Bismarck or whatever. They didn't want that. Central Bank is not an American institution, so they called it something completely different. It's actually kind of genius. They called it first the word federal.

Federal meaning decentralized, you know, consistent with the Tenth Amendment, you know, where these United States, we don't have a central government. We have a federal system where we, you know. And so to accomplish that federal piece, the new central bank had branches. You know, had Minneapolis Fed, Atlanta Fed, Dallas Fed, Chicago Fed, San Francisco Fed.

So there's many Federal Reserve banks around the country. And for no apparent reason, really, except to create the illusion of decentralization. Okay? So there was that. And even now, they're gigantic and they employ all these researchers. They say interesting things. But there's no, really, there's no reason for all these feds around the country. The second part, this word reserve, is funny when you think about it, because it implies

that they have something. They're in the possession. We have the reserves. Just in case we need them, we have the reserves. If there's a crisis, we're going to be there to help you. You can have confidence in the system because we have reserves. you know, whatever. In those days it was gold.

Yeah? Well, we're... You don't need to worry. Finally, we have a system that's stable and functioning and scientific. Now, the science part of this thing is also interesting because it comes along at the same time that macroeconomic theory was sort of developing. And the idea was that the Fed eventually, not initially, but not initially, but not initially, but But eventually, the Fed would guarantee, would seek low inflation and high employment, or at least low unemployment, and some sort of economic stability.

So they had this sort of mission, a big broad mission, managerial mission over the whole country. The original Fed, keep in mind, so the founders of the Fed and the ethos of the time was They're tired of the chaos. They're tired of the chaos of the markets. They're tired of the bank failures. We're going to stop that. But we're also going to guarantee low inflation. I mean, this is widely believed.

Now, there's plenty of people out there think the Fed is just a big demonic conspiracy. Racketeers. Maybe there's an element of that or whatever. But what I see in the founding of the Fed is as a sincere, an authentic desire to stabilize the system, bring intelligence, rationality, managerial prowess, and expertise to a sector of society that had long been subject to waves of chaos. I think they had every intention of doing good work.

The founders of the Fed weren't all, they weren't bad guys. Many of them wanted sound money. In fact, some of them wanted to stop the credit expansion. They didn't like the way these wild-capped banks, you know, you'd have a bank pop-up Bob's bank. Oh, the railroad's coming along. Here's your money. Here's your money. It'll lend the money. I'll collect the money, and then the bank goes belly up and people lose their deposits, you know? And then the bandits would be on the run. They didn't like that. They

were kind of stodgy old timers in a way. Let's have gold and a frugal, thrifty middle class and stop with all this nonsense, right? So this is sort of the ethos of the first Federal Reserve. But the problem is that in the end, despite his name, despite the intentions of the founders, it was a central bank. And if I may, just talking about words and words changing meaning, you know, even growing up, hearing about federal reserve or federal anything, it didn't never occurred to me. And of course, I grew up in Canada. I wasn't taught these things, right?

That federal meant decentralized. I, in fact, thought precisely the opposite, that federal meant centralized, that it's a function of the federal government. Yeah, well, this traces to an ambiguity in American history over the word. Well, and it's just, it's very interesting because that maybe the shift in the understanding

of their word maybe reflects the shift of how at least some aspects of our society think about how we should be governed. Yeah, you know, even at the founding period before the Constitution, there was a lot of mix-up about these words because they were the federalists, you know. Great. And a lot of people looked at the federalists and say, you're not federalists. You don't believe in a federation of states. You're centralists.

You want a central government. The people who objected to the Constitution came to be called the anti-federalists. Now, that's funny because, of course, they were the real federalists. I mean, if you believe the anti-federalists, they believed themselves to be the real federalists, and what was called the federalists were really centralists. So this is where the ambiguity comes from. But I think generally we use the word federalism to mean a decentralized system. And in American history, that means granting to states' rights.

And we still have many, many states' rights. We still have a federalist style system. 100%. Yeah, 100%. And, you know, Lord Acton said that federalism was the only true great innovation of American political life. The idea that you would have an overseeing kind of structure that was severely restricted in this power, but most of the powers belonged to the historical political units called the states. Lord Acton said that was the great.

achievement of American history. Well, the famous term is, right, that they're the laboratories of democracy. And indeed, you know, I'm just thinking right now about Dr. Joe Latipo in Florida, declaring that he's going to get rid of all mandates in Florida law. And he can do that. And there'll be other states that, you know, we could call them super mandate to believe, you know, this is kind of the opposite of that. And in fact, some have even declared that in response to this, something in that vein.

But there you go. there's that opportunity you can see how does this play out right yeah it's a great example right yeah it's a great example we're deviating no but it's important it's important and it connects to our topic because of the very name federal reserve i mean there's this thing never would have gotten to under any circumstance of it under a different name if it had been called the third national bank it would have been dead in congress in no time but because it was called a federal or the central reserve or the central reserve or the central bank you know like or the Bundesbank or the Bank of England, you know, these were central banks, but in America, we didn't have that.

We had a federal reserve, and they created all these branches around the country just to underscore the point. And in those days, you know, progressivism, what came to be called progressism, was an ethos alive in the country. The belief that we would take the tools of science and apply them to public policy, to engineer progress. This was the essence of progressivism. And that revealed itself in a number of ways which we now, I think, find regrettable, like eugenics, policy was a progressive kind of policy.

Prohibition of alcohol was kind of this mandatory uplifting the population, a consequence of a progressivism. But 1913 was a remark. year because you had another aspect of progressism was the income tax. I mean, before 1913, I just imagine, every penny you earned, you got to keep. It didn't belong to the federal government at all. I mean, they had no access to any of your income before 1913. And so we had a constitutional amendment that enabled the income tax.

We had really a shock. really a shocking amendment to the Constitution that eliminated the bicameral Congress and forced the Senate to be elected by the people in the states instead of being appointed by the state legislature. It's fundamentally changed the structure of the U.S. Senate and eliminated the bicameral structure of the founding fathers and replaced it with what was essentially an experiment. Well, what I'm saying is that the Federal Reserve was the same kind of experiment. It was a progressivist experiment in the application

of expertise and science to the sound management of the monetary system of the country. But what's interesting is that, of course, of course. And anybody would have predicted this. I mean, Thomas Jefferson certainly would have Thomas Payne. This whole generation would a prediction. If you get anything like a central bank, a national bank, a central bank, it will be abused.

It will be abused to me. But the matter the intentions, whatever, it'll be abused. So what presented itself soon after the Fed was founded, the war in Europe, the Great War? It was a mess, a terrible mess, and Americans wanted nothing to do with it. But at some point, so what kept America out at wars, for the most part, was, well, we just didn't want to afford it. We didn't have the money, you know? Solve your own problems. We're over here on the other side of the world.

We can mind our own business over here, and we don't have the money. Well, now with the Fed, you have the money. You've got a printing press. You've got this weird power of this one institution to buy and hold government-created debt with money that didn't previously exist. A check. The nation had a credit card with an infinite balance on it,

infinitely high limit. What could go wrong? What could go wrong? Right? That actually, you know, and again, I think the founders of the Fed didn't really imagine this. They thought, well, we're all, look at us, we're responsible guys. You know, we know what's what. We would never do something like that.

Well, they lost control of it right away. And so the Fed was probably the reason why the U.S. entered the Great War. That was probably the reason. And certainly, and there's been a lot of empirical research about this, the Great War would never have happened without central banks in Europe. central banks in Europe funding it. The entire great war was the central bank funded, fiat money, debt financed project made possible by central banks, among which the Fed.

The Fed didn't invest itself as heavily in war as, say, the Bundesbank or the Bank of England or something like that, or the Russian Central Bank. But still, I don't think the US would have ever entered that war, were it not for the Federal Reserve. And then the problems began. You know, people don't understand this, but soon after the war ended, the U.S. experienced one of the worst inflations between 1918 and 1921, the dollar lost.

Now, the data is a little unclear on this, as best we can tell. The data lost as much as half its value. The dollar lost half of its value. Yeah. Yeah. And this was not entirely because the Fed was going into the open market and buying government debt and printing money because we were under this gold standard.

But because the U.S. had involved itself so much in lending to foreign governments, they paid back this in the form of gold. So we experienced a huge influx of gold to the country, which did two things. It reduced the value of all existing stock of money, right? That's the way inflation works. So a huge importation of gold from a rod,

lead just like it did in the Spanish Empire, an importation of gold leads to inflation. So we experienced this big inflation, in part because of the war, and then a business boom that resulted in a huge business cycle bust in 1921. Now, fortunately, in those days, We weren't yet disciples of John Mayn and Keynes,

and we weren't using the power of the federal government to try to reverse the economic downturn. There was a complete laissez-faire hands-off policy, who cares, and the thing corrected itself in 18 months, and we were back again. That was the very first crisis of the Federal Reserve, happened very, very quickly afterwards, inevitably. Now, at that point, they should have said,

you know what, let's unplug the stupid money machine. For all the problems of the wildcat banks, is better than this. Better than total war, conscription mass death of people all over Europe that the central banks caused, but they didn't do that. Fed went back to trying to run a sound business policy. But five years later, they couldn't fix the problem.

And the credit expansion extended. It continued. And then the Fed faced another problem. Every president wants lower interest rates. We have four years. We get a new president in. He inhabits this sort of world. He gets annoyed.

He wants to see rising prosperity. He wants to see economic growth so we can get credit for that. And a major inhibitor of that always is the limitations of the financial system. And if the Federal Reserve has the power to determine the lending rates between itself and its member banks, member banks, which it does, they can set any rate it wants, then the Fed bears responsibility for the interest rates of all the way up and down the yield curve throughout the entire country and can drive growth,

or it can drive pullback on growth. Well, and hence the president taking big issue with the Fed right now. And again, I don't, I'm not here to agree with Trump's evaluation of this. Although, you know, in his defense, you know, he's a businessman, and he's worked in debt and banks all of his life, you know, raising the, you know, huge empires all, you know, all over the place of business and dealt with banks. And he always wants the best rate. Like, as a businessman, he's not going to accept the rate that's given to the

Hoypiloy. You know, he wants it, right? He wants the best rate on his, on, for the money that he's getting. He believes in debt. He believes in leverage as a businessman. He came of age and the age of leverage. So he believes in leverage and he believes in low rates. So he's using that model and applying it to the entire country. So I get it. I think it's reckless, but I get it. So this may not be the ideal conditions under which to challenge the Fed's so-called independence, but I am nonetheless a lot about it. I think this is a reckoning we have to have. who's in charge of this thing that we call the Federal Reserve? Well, and so in terms of, you know, there's a great number of institutions in this country

that are involved in finance, right, private, private, public, and we do have this astonishingly large debt in America right now that's kind of been accelerating, right, through the interest payments and so forth. How much of a responsibility does the Fed have for this reality in your mind and the grand scheme? Yeah. So a big question, I do recall that when I was a sophomore in college as an economics major, when I discovered the power of the central bank in terms of its capacity to geopolit? drive prosperity, drive inflation, send whole societies into upheaval.

French Revolution, Bolshev, I mean, go through it. Look at the Weimar inflation of Germany, arguably without which we would never have seen a Hitler. You realize that the monetary piece of public policy is huge. It's gigantic. It's something that once you start looking into it, become obsessed with it.

And I did. I did. I wrote my undergraduate thesis on the Federal Reserve, in fact, and on the gold standard. And it was the longest thesis in the history of the academy where I attended. Because I just got obsessed with it, because I think it is really important. Lots of people argue for a constitutional amendment to balance the budget. A lot of people want the Congress to cut spending and so on, so on. But until you unplug the Fed's capacity to just print money and cover up for all the profligacy of Congress, we're never going to get there.

We need sound money. Or we're never going to get anything remotely like a balanced budget. It's the Fed that makes it all possible. It is the Fed provides a moral hazard that results in ever bigger government, ever more debt forever. And, you know, I'm cautious. about people who always want to paint the chairman of the Federal Reserve of some sort of demonic devil guy. I don't think that's really true. A lot of these guys have every aspiration to run a good policy. I mean, I think Jerome Powell, let me phrase this, I think Jerome Powell

knows what's right, and I think he wanted to run a sound policy. He inherited Ben Bernanke's policy of zero interest rates, which is a grotesquely irresponsible policy. It never should have been imposed after 2008. And it bloomed up the assets of Federal Reserve. They wanted to normalize the balance sheet. And Jerome Powell had every intention of doing that. And that's what he did do. He started cranking up interest rates, a little bit of time,

wanted to normalize the Federal Reserve policy, make it more responsible, clean up the Fed's balance sheets, get all these bad mortgages off the books. and set us back on a good policy. He is a sensible, reasonable, reasonable human being. But they came to him in early 2020 and said, Mr. Pell, you may be a good manager of the monetary system. You may be a good and respected head of the banking system.

You also have responsibilities to larger issues, like the priorities of the federal government, too. And we've got a virus on the way. And we're going to have to deal with this in a big way. This campaign you have to raising interest rates has got to stop. Right now, starting out now, I don't have a transcript. I don't know if a fact this happened, but you can look at it in the data. They got to them. He said, you have to serve the cause right now.

You are federally chartered. You have a responsibility to the government here. We want these interest rates to fit and match what's about to happen. So sure enough, I think it was about March 12th, maybe March 10th. He slammed the rates back down to flat zero and accommodated trillions and trillions of dollars of conscressional spending for the coronavirus and created more money in those 18 months to two years than we'd ever seen really in American history certainly since World War II I mean it was an unbelievable thing this is not

what Powell wanted but it's what he had to do because he was being pushed from every end. We don't know who. And because the structure existed to actually do it. Because it was possible. You know? You can send your college kit off with a credit card with an unlimited balance on it and tell them to be frugal

and be careful about his spending. But it's probably not going to be. That's essentially what we're dealing with with the Federal Reserve. We've got the whole federal government on this Fed credit card, and they just can't stop. It can't stop it. And it also just strikes me that the way, and just please comment on this, but the way it's structure strikes me that the locus of responsibility seems to be diffuse or unclear.

Yeah. So this is right. And this is what I think we're going to have to get settled. And this is why I admire what Trump's done so much with this. I think what Trump's done here with this Lisa Cook thing is just brilliant. I mean, he found a way in to test the powers of the people's elected leader. over this central bank that has lived for more than 110 years in this kind of obscure floating realm of independence.

And we don't really have access to their books. We don't really know what goes on with the Fed. Yet, they have to present reports to Congress. The government can audit them like they audit the Pentagon or anybody else, but they've never been exposed to an outside audit, any big company would be. They've never been outside. Even the Rand Paul's introduced legislation, his father before him, going back decades, to audit this thing. It still has not been audited. So there's weird stuff going on. It's an unaccountable institution. It's really a beast.

It's responsible for the financialization of the U.S. economy, the explosion of the capital goods sector, at the expense of the consumer goods sector. It's arguably been the reason for the blow-up of the managerial state, and for the puffiness and frothiness of the corporate world, the centralization of business, the persistence and rise of the media. It's like a lot of things. What's the frothiness of the business world exactly?

Oh, but just, like, ever since ZERP, since 2008, we have a whole sector of society of people inhabiting, but in high-level corporate positions, getting paid very high salaries because of their resumes and don't actually do anything. OK, that's the frothiness. This is well documented, and it's a shock, really. And I think Fed bears most responsibility for that.

That was zero interest rate policy. When money is free, you're crazy not to carry debt. You're crazy. If you make any money at all, you're going to be making more than it costs you to borrow money. Right, but that only works for people who have the ability to access that money. That's right.

It's a very specific group of big players. It's a big business. That's the reason why big box stores are taking over everything. We've got a weird situation in this country. We don't have small businesses that are happy to do small businesses. Most businesses have started these days to be acquired by another business. And those businesses are acquired in hopes of being acquired again.

It's a crazy thing. And this is especially true in the world of finance. You would never start a fund with the expectation to hand that it off. fun off to your kids or their kids. No, your goal is to be impressed buyers who buy you, and their goal is to impress even hire buyers. Everybody wants to be golden sacks.

Right. It's terrible. Well, and just on that note, you know, I know a number of scenarios where people who understand exactly how this works have built, you know, small businesses, so that those numbers look just right for the people that are going to be doing the acquisitions. It's astonishing, right?

Yeah. But the actual, sort of, the inherent value is not very interesting, if that makes sense. Like, it creates this weird world. It's very strange. A lot of it is because of the leverage and the debt finance and the financialization that's taken place. Like, there's so much fakery in the world because of the central bank. You know, which creates a real... So we're at a very interesting time because we are maybe on the verge of solving this problem.

What is the central bank? To whom is it accountable? Is it an executive agency like the org charter of the federal government says? Or is it somehow, I don't know, independent, I don't know. By the way, can Congress really give up its powers? It was given control in Article 1, Section 8, over the money and the coinage. That's what the Constitution said. This is your job, Congress.

Can they really just write a legislation and go, yeah, we don't like this. much and toss it over to the executive department? Can they really do that? Can you just delegate whatever you want? I mean, how do we know that the Federal Reserve Act was even constitutional? Do we know that? Has it ever been tested?

It's never been tested. I'm not sure they can really do that. And if they're going to do that, then they have to expect that the head of the executive departments, you know, the head of the executive branch, will expect to have some sort of managerial control over the central bank, because Article 2, Section 1 says the US president is the head of the executive branch.

The Federal Reserve lives under the executive branch. It's not complicated. The Constitution says this power belongs to Congress. Congress punted, gave it to the president. Well, now the president's going to be in charge. I think it's the way it's going to be. Is the Supreme Court really going to say, Yeah, I know there are three branches of government

and all that kind of stuff, but that's central bank. We're just going to let that float around. You know, that's not good. That's, how can you, you can't say that. There's nothing in law that would seem to make it possible for the Federal Reserve to forever claim to be some independent floating, all-powerful hegemon. And if I may comment, you know,

I'm just kind of thinking through here everything that you're saying. And it's not entirely clear to, to me, you know, and I'm always thinking of, you know, what Alan Dershowitz calls, you know, the shoe is on the other foot test. Just think, like, what are the ramifications of a decision in the future with different people with different ideologies, different approaches dealing with it? It's not clear to me which of these solutions actually is the one that makes most sense. Yeah, yeah. Including even the, I mean, I suppose the independent floating one is when you don't, you really don't want because you end up with this situation where you have, you know,

For example, in the U.K., these independent NGOs, kind of making decisions for the executive, in effect. That's what the founders feared the most. They feared what, you know, unaccountable central bank. That's why it never really gained traction. And every time that's an unlikely route. Let's leave that one out. I think it's unlikely. But does it look like Congress taking control of monetary policy?

What would that even look like? And does it... Yeah, I don't really have an answer to that. You know, part of the problem is... And I wrote an article for the Epoch Times a couple of days ago. Thank you, by the way, for publishing that. So I, at the outset of the article, warned everywhere this most boring article you will ever read.

But I did a taxonomy of monetary regimes. like 10 possible policy priorities and systems that you could have in this country as systems and also possible routes of reform, you know, pass to reform. So I can map out to you right now what I think is the ideal system. And I think we had that in this country. It was free banking combined with a congressionally established and presidentially enforced gold standard. I think that was beautiful. It's not so simple to say, let's go back to that.

I don't know how you would do that. I don't know how you get from here to there. But look, we have what we have right now. We're going to get something different soon, right? probably as a result of a court decision over this very, very provocative, but I think quite brilliant move by Trump to go after a Fed Reserve board governor. Fire her for cause and then just see what happens. I don't know. I don't know how it's going to end up. I can see dangers in all directions. I will tell you this. I think it's time for some accountability and it's time

for some clarity about what this thing we call the Federal Reserve is, to whom it's accountable, and whether and to what extent the voters have any place or role in oversight and controlling it. If we don't, we're going to continue to lose our economic freedom, our independence, our aspirations for an enterprise in the economy with frugal people who can save money and be rewarded for doing so. There has to be a change. We live in times of great nostalgia. People want to recapture what we've lost as a nation.

Freedom, independence, frugality, prosperity, families that can live off one income and so on. None of this is going to be possible unless we can figure out a way to restrain the Federal Reserve. I think in a circuitous and sometimes familiar way, President Trump gets that. Intuitively, he understands that. This institution must be held to account.

It must be accountable to the people and to the people's representatives. And I think that's a good decision. I think it's a good step to see how it turns out. Well, Jeffrey Tucker, it's such a pleasure to have had you on. My pleasure. Thank you, John.

Thank you all for joining Jeffrey Tucker and me on this episode of American Thought Leaders. I'm your host, Janja Kellick.