Those who know Wall Street lore sometimes recall that Fed chairman William Miller—Paul Volcker’s immediate predecessor—joked that most Americans believed the Federal Reserve was either an Indian reservation, a wildlife preserve, or a brand of whiskey. The Fed, of course, is none of those things, but there’s also one other thing the Federal Reserve is not: an actual bank. It is simply a government agency that does bank-like things.

It’s easy to see why many people might think it is a bank. “Bank” is right there in the name of the twelve regional banks that make up the system: for example, the Federal Reserve Bank of Kansas City. The Fed also enjoys many titles that make it sound like a bank. It’s sometimes called the “lender of last resort.” Or it is sometimes called “a banker’s bank.” Moreover, many people often call the Fed “the central bank.” That phrase is useful enough, but not quite true.

Moreover, even critics of the bank often repeat the myth that the Federal Reserve is “a private bank,” as if that were the main problem with the Federal Reserve. And then there are the economists who like to spread fairy tales about how the Fed is “independent” from the political system and makes decisions based primarily on economic theory as interpreted by wise economists.

The de facto reality of the Federal Reserve is that it is a government agency, run by government technocrats, that enjoys the benefits of being subject to very little oversight from Congress. It is no more “private” than the Environmental Protection Agency, and it is no more a “bank” than the US Department of the Treasury.

It’s a Purely Political Institution

In its early decades, Congress and the Fed went to some pains to make the Fed look like a private organization that was self-funding, economically solvent, and subject to market forces.

For example, the Federal Reserve System was created—at least on paper—as a very decentralized organization. To this day, it has “shareholders,” which are the private “member” banks of the Federal Reserve. In the early years, the Federal Reserve System’s district banks operated fairly independently. Moreover, these shareholders were (and legally still are) supposed to incur losses when the Federal Reserve is in the red. Back in the days of the gold exchange standard, the Fed had gold reserves and its “banknotes” were supposed to be truly tied to those reserves in the banks. The Fed banks made revenue from discounting bills of exchange and from charging interest on government bonds. These relatively simple organizations were supposed to loan reserve funds to ensure banks had enough liquidity to remain solvent and help deal with financial crises.

The idea of ensuring Fed banks had real capital reserves made some sense when there was a domestic gold standard. But that all changed in a big way with the Great Depression. When Franklin Roosevelt ended the gold standard, the Federal Reserve Banks were forced to hand their gold over to the US Treasury. (To this day, the Fed has no gold.) Then came an enormous expansion of the regulatory state’s role in financial matters, and the Fed became a big part of this. Today, the Fed is far more a regulatory agency than it is any sort of “bank.”

It Monetizes Government Debt

Then, during the Second World War, the mask completely came off the ruse that the Federal Reserve was something other than a way to essentially launder government debt. As the federal government issued enormous amounts of new debt to finance the war, the federal government exhausted the market demand for government bonds at the interest rates the government was able to pay on its debt. So, the Federal Reserve stepped in to buy up large amounts of debt, which kept down interest rates. Fed chairman Henry Morgenthau “simply decreed that interest rates on the federal debt would be ‘pegged’ at low levels.” This pegging required the Fed to buy up a lot of government bonds. But, of course, by then, the Fed had no gold and no reserves in any meaningful sense. It simply created money to buy up those bonds—thus “monetizing” the debt. There was no economic theory or savvy commonsense “banking logic” at work. This was simply an organization doing what it was told: financing a war for politicians. Moreover, with the dollar no longer tied to gold—especially after the closing of the gold window in 1971—the Fed could create money largely at will.

All of this became progressively normalized in the decades after the war. But it all took an additional great leap away from market-based sanity after the financial crisis of 2008. Since then, the Federal Reserve has routinely bought up both government debt and mortgage securities as a means of both propping up asset values for politically connected banks and enabling ever-larger amounts of deficit spending by the federal government. For example, when federal politicians in 2020 and 2021 wanted to spend trillions of dollars to pay people to not work during the covid lockdowns, the Federal Reserve was there yet again to make it possible the federal government to issue trillions of dollars in new debt without pushing interest rates up. The Fed did this by adding more than $3 trillion in government bonds to its portfolio. This monetized the new debt in a similar way to what had been done during the Second World War.

Through it all, the Fed has just been there to assist the US regime in implementing a variety of policies.

It Can’t Go Bankrupt

In spite of its record, the Fed continues to keep up the fiction that it is some kind of private organization with a real balance sheet, real assets, and real liabilities. But the Fed also doesn’t adhere to any of the accounting standards that a real bank would employ. As Paul Kupiec and Alex Pollock put it, “Unlike other financial institutions that must comply with GAAP [Generally Accepted Accounting Principles] accounting standards, the Federal Reserve Board decides on the accounting standards it uses to report the Federal Reserve System’s income and balance sheet positions.”

This reality has become important in the past year because, for the first time in a century, the Federal Reserve is losing money. Kupiec and Pollock note, “If the Fed was a bank or other regulated financial institution, it would be closed because it is already deeply economically insolvent.” Yet “‘Innovations’ in accounting policies adopted by the Federal Reserve Board in 2011 suggest that the Board intends to ignore the law” and carry on as if there were nothing wrong. It can do this, of course, because the post-gold-standard Fed can create money at will. These “innovations” are described in detail by Robert Murphy, who noted back in 2011 that the Fed had deliberately changed the way it does its accounting to ensure that bankruptcy is a legal impossibility.

[Read More: “Ac-cent-tchu-ate the Positive: The New Accounting at the Fed” by Robert Murphy]

The fake accounting didn’t matter much in 2011, when the Fed was still essentially solvent. But in 2022, honest accounting showed that the Fed was insolvent. How did this happen? It’s a result of the fact that the Fed now has a very similar problem to what the savings and loans had in the late 1980s and early 1990s.

But whatever its cause, the Fed’s current bankruptcy is simply the latest example of how the Fed is in no way a real bank or a private organization that funds itself through prudent self-management in the marketplace. Even worse, the Fed funds itself while in bankruptcy by printing money and inflating away the value of the dollars held by ordinary people. The Fed is just another tax-funded government agency, except that the tax that funds the Fed is the “inflation” tax, in which the Fed steals pieces of wealth from savers and workers as it devalues the dollar for the Fed’s own benefit. Or, as Kupiec and Pollock note, the Fed can “monetize Federal Reserve losses, thereby transferring them indirectly through inflation to anyone holding Federal Reserve notes, dollar denominated cash balances and fixed-rate assets.”

The Fed: it’s not private, it’s not financially sound, it’s not a bank. It’s just another government technocracy that’s ripping us off.

In the ultimate example of “the personal is political,” families form, break up, or expand due to US presidential elections according to a recent article in the American Economic Review. Apparently, the alternative responses of doom or elation that occasions electoral politics is so extreme that the losers couldn’t bear to bring a child into such a world, while the winners . . . well, you know.

In setting the stage for this phenomenon, the authors noted that

when Trump was elected, Democrats’ satisfaction with “the way things are going in the United States” fell from 43 to 13 percent, while Republicans’ surged from 12 to 46 percent . . . these swings by partisan orientation are large, immediate, and persistent and especially so after the unexpected victory of President Trump in the 2016 election. Similarly, after the 2020 Presidential election, Democratic and Republican optimism rapidly exchanged positions.

But are these electoral mood swings enough to alter peoples’ decisions about bringing new life into the world? In short, yes.

In a thymological exercise, the authors explain that electoral outcomes alter peoples’ views about potential policy changes and their effects on everyday life, economic optimism, and changing beliefs about the political and social climate. Put simply, beliefs about future conditions are a part of the “valuations and volitions” behind human action, including marriage, sex, and childbearing. As Ludwig von Mises put it,

The sex impulse and the urge to preserve one’s own vital forces are inherent in the animal nature of man. If man were only an animal and not also a valuing person, he would always yield to the impulse that at the instant is most powerful. The eminence of man consists in the fact that he has ideas and, guided by them, chooses between incompatible ends. He chooses between life and death, between eating and hunger, between coition and sexual abstinence.

Mises says nothing about the accuracy of peoples’ ideas on how to achieve future outcomes, rather that such assessments guide their choices. One’s ideas about the impending doom of a particular candidate’s election and family planning choices that emerge from such thoughts are rational in that they follow a logic, no matter how mistaken one’s predictions might be. Certainly, such beliefs will obviously reduce one’s desire for having more children.

The authors conclude that there is

a new consequence of elections and a new determinant of fertility. We are the first to causally link political partisanship to fertility choices . . . our findings could be due to affordability concerns but also the quality of a potential child’s life.

They further state that the impact of this partisanship in procreation led to eighteen thousand more Republican babies and forty-eight thousand fewer Democrat babies than would have otherwise been the case.

As it turns out, the fertility shift after the Trump election isn’t the only aspect of family life that has been affected by political polarization. Just six years ago, 30 percent of US marriages were “politically mixed.” In less than a decade that number has dropped to 21 percent. But when it comes to the percentage of marriages between Democrats and Republicans specifically, these are rare. According to the Institute for Family Studies, in 2017, 4.5 percent of married couples were spilt between team red and team blue, but just three years later only 3.6 percent of marriages had the same makeup.

Such dramatic changes in marital matching in such a short time have two basic explanations. First, many politically mixed marriages have ended in divorce, and second, fewer politically mixed marriages are forming since the Trump election. Evidently, presidential politics has some explanatory power when it comes to marriage avoidance and divorce. But when it comes to fertility choices among same-party marriages, those who have the belief that their candidate’s loss is proof of an eminent apocalypse have given over to a kind of rationalization that views the future as a place that isn’t fit for newborns.

Such beliefs and corresponding actions are further evidence of the poisonous nature of political polarization. If couples are so animated by the political partisanship to destroy or avoid marriage, or to refuse to bring new life into the world, then perhaps love doesn’t conquer all—but politics does.

One may ask, what if one of these sides is correct in their estimation of the world that their political opponents would create? As I’ve written previously, the progressive left is a political force that calls for state control of child-rearing. However, the solution isn’t to have fewer children or to avoid marriage due to fear over future economic conditions. Rather, the solution is to defeat the agenda and ideology that is genuinely antifamily, not deprive oneself of familial bonds.

Whenever asked about whether the US will change its policy regarding the conflict in Ukraine, to start pushing for Kyiv to enter negotiations rather than apparently providing as much money and as many weapons as they ask for, the Biden administration’s refrain has been a consistent variation of “We’re going to keep doing what we’re doing as long as it takes.”

As long as it takes for what?

For Ukraine to “win” its war against Russia, taking back all land occupied or annexed by Russia since 2014.

While it isn’t clear this is possible, and even less clear that pursuing such a maximalist outcome is in the American national interest, Joe Biden and his administration officials continually play dumb at the notion they could end the war, or they feign offense at the suggestion that the decision isn’t one entirely up to the Ukrainians, a decision the Biden administration cannot and should not in any way influence—it was the Ukrainians, after all, who elected Volodymyr Zelenskyy on a war platform.

Except, of course, that he was voted in on a peace platform.

As is now openly acknowledged, instead of then backing Zelenskyy when he tried to get the ultranationalists in the eastern part of Ukraine to submit to central authority and agree to elections per the Steinmeier Formula to implement Minsk II, as negotiated by the governments of Ukraine, Russia, France, and Germany, the Trump administration shrugged and told Zelenskyy to take a hike. The frontline ultranationalists who told Zelenskyy to go to hell—those are the guys the US government has been working with since 2014 and arming with heavy weapons since 2017.

Not that all the weapons are getting to them, as no one was surprised to find out—nor much of the money for that matter. The situation has gotten so unacceptable that the Washington Post, while it still cheers the hurried passage of every new appropriation earmarked for Ukraine, has dared to openly question where all the guns and money that aren’t going to Ukraine are going. CBS released an entire documentary, which was then almost immediately partially retracted under pressure, casting a critical eye on the policy, which is corporate media speak for “This is a huge problem!”

Rather than halting or slowing the process in response to these justified objections, the Pentagon went ahead in October and put US troops in Ukraine to supervise.

Um. What?

But while the deaths pile up and the stalemate continues, Americans should keep in mind that this is all part of the plan: to get other people killed so the US government can weaken Russia and intimidate China. At least, that is what they think the plan is doing. It is hard to say for sure. Russia will be economically and technologically less robust over the long term, and no one likes running afoul of the US Treasury, but it obviously seems to push Russia and China closer together. Was that part of the plan? If so, was it a good plan?

Other than finally admitting what we already knew, which was that flushing weapons down a black hole half a world away in one of the most corrupt countries in the industrialized world was a bad idea, the so-called Fourth Estate really has been failing abysmally. Though predictable, the corporate press has never met a war it doesn’t love; the copy the Wall Street Journal and Washington Post have been publishing is naked war porn: daydreams about the North Atlantic Treaty Organization (NATO) blowing up the Russian ships blockading Odessa or about seizing the advantage from China and militarizing, or rather further militarizing, the Taiwan Strait in order to show Beijing that Uncle Sam isn’t going to be intimidated.

Because, you know, that’s how the Cuban Missile Crisis was resolved without blowing up the world.

Yikes.

Then there are the tragically misnamed “think tanks,” the ones usually funded by some combination of foreign money and kindly donations by such equally disinterested third parties as Lockheed Martin and Northrup Grumman—all of which are so totally and obviously legitimate, they aren’t required to state any conflicts of interest as they breathlessly bang out their jeremiads about the dangers of repeating Munich, of the necessity of maintaining the credibility of American security guarantees—no matter how previously ill thought out, ambiguous, or now plainly inappropriate these guarantees are given the changed circumstances of the present.

Even if Tom Cotton doesn’t think we should question whether a security policy designed seventy years ago under very different circumstances merits questioning, it seems a prudent thing to do.

What’s the war even over, again? Membership in a security alliance Ukraine didn’t qualify for nor would have strengthened, which is already too big by half and which doesn’t even concretely serve American interests anymore? Democracy? Democracy everywhere is on the line if it vanishes in one of the most peripheral and corrupt countries in all of Europe, rated on par with Russia itself?

Let’s chance it.

Let’s say “NO!” to another forever war. Because while the endless conflicts of the terror wars could sit and simmer neglected and safely out of sight, quietly costing just a few extra trillion dollars and couple of thousand (American) lives, at no point did any of these conflicts approach the inherent dangers of a possible direct exchange between NATO and Russia, nor did their carry-on effects threaten the starvation and impoverishment of so many around the globe.

This has gone on long enough.

Mistakes were made—fine, that happens. No one is going to own up to them—predictable, but that too hardly matters anymore.

What matters is that multipolarity is a fact, see Olaf Scholz in Foreign Affairs, and that Washington’s own terrible example did more than anything else to undermine the “liberal rules-based international order,” see every other invasion of one country by another over the last thirty years. And while Washington’s capacity for resisting facts is almost as legendary as its penchant for making them up, there still remains time and hope that Americans will be able to rein in their government. The majority still can’t find Ukraine on a map, know a blank check isn’t a good policy, and don’t believe Ukraine will win.

The prospect of American political leadership with the bravery and vision necessary to chart a new course may be dim, but that should not stop those who oppose the current policy from voicing their opposition.

Far from it.

As reports by the Times of London on the Pentagon “tacitly endorsing” Ukrainian strikes deep into Russia make clear, the current precarious balance between belligerents could shift suddenly and with horrifying consequences.

The only way this was ever going to end, outside of escalation to a war between Russia and NATO and the likely end of human civilization, was through a negotiated settlement. It seems preferable that any division be done with a pen rather than a gun.

If nothing else has been made clear by Russia’s invasion of Ukraine, the rest of Europe is in no danger. If deals could be struck with the likes of Joseph Stalin and Mao Zedong, the greatest mass murderers of the twentieth century, and direct support given to the repressive, dictatorial regimes of Suharto, Anastasio Somoza Debayle, Mobutu Sese Seko, and Syngman Rhee, to name just a few, surely a deal can be done with the current occupant of the Kremlin.

Australia’s superb performance on measures of international development has earned her the admiration of many. Few countries can boast such stellar achievements in economic and social affairs. Currently, Australia has the highest median wealth per adult in the world and outperforms the Organisation for Economic Co-operation and Development (OECD) average in civic engagement, health, education, and other dimensions of well-being.

Australians are equally lauded for their responsiveness to changes in the digital economy and their inventive abilities. However, the spectacular success of Australians has puzzled onlookers who find it unfathomable that a colony settled by convicts could become so prosperous. But what they forget is that most convicts sent to Australia were not hardened criminals. Many were implicated in work-related crimes, for example, theft of tools or other materials from employers.

These convicts were not irredeemable and became oriented toward pursuing productive goals. In England and Ireland, such people were often working-class individuals, who engaged in economic crimes due to desperation. On average, the convicts were also young, literate, and healthy. Some estimates argue that literacy rates among convicts were similar to British levels. Also, it is of note that some of these convicts were university-educated social activists.

Because these convicts were young and healthy, they could afford to extend their working years, thus enhancing national productivity. Moreover, groundbreaking research pioneered by gender historians has dispelled the myth that women shipped to Australia were mostly prostitutes lacking valuable skills. Instead, new information has shown that women were instrumental in Australia’s early development. Female convicts were literate and possessed an impressive array of skills. Many were talented seamstresses or hucksters in England, and these skills proved beneficial to the Australian economy.

Economist Noel George Butlin remarks that Australia in the nineteenth century was blessed with a high proportion of industrial skills in a wide variety of sectors. He notes that although textile skills were undersupplied, settlers compensated for this deficiency by being productive in metalworking, woodworking, and transportation. Further, as Butlin points out, the conditions imposed by colonialization fostered the cultivation of new skills by settlers: “Pioneering conditions imposed the need for many skills and the possession of one by each member of the workforce could mean the ability to deploy that skill for important purposes. Thus, in establishing farms, a carpenter or bricklayer who may have been an indifferent ploughman or shepherd could nevertheless deliver needed construction labour. A blacksmith turned publican still had considerable scope for the exercise of skills in taverns and transport activity.”

Convicts proved to be adaptable to new circumstances. The skills of most people complemented the economy, since they were allocated work commensurate with their skills. This led to greater efficiency because the abilities of convicts were cohered with the economy’s demands.

Even more amazing is that the entrepreneurial ability of convicts catapulted many into the upper echelons of society. Moving to Australia liberated working-class people from the constraints of socially conscious England. In Australia, they could chart a fresh path unencumbered by classist restrictions, and many did so successfully. For example, Mary Reibey was deported to Australia at fourteen, and by thirty-four she was widowed and owned ships, farms, and a warehouse. Like Reibey, other settlers were endowed with entrepreneurial and business skills that made Australia dynamic.

Solomon Wiseman became an outstanding businessman after concluding his sentence, and he was not unusual in this regard. The entrepreneurial success of ex-convicts seems shocking, but it is understandable. Entrepreneurs, like criminals, are risk tolerant, and a popular study published in the Quarterly Journal of Economics titled “Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More?” actually posits that people who participated in illicit activities as youngsters are more likely to become successful entrepreneurs.

The explanation is that successful entrepreneurship requires people to be bold, and sometimes this results in breaking established norms. Interestingly, other studies have confirmed these findings by showing that misbehavior in high school predicts higher earnings in adulthood. Rule breaking is often problematic, but intelligent rule breakers with an appetite for risk can go on to lead positive transformations in society.

Therefore, Australia’s success seems less baffling when we begin to appreciate the link between delinquency and achievement. Nineteenth-century Australia with its egalitarian ethos and socially ambitious, but mildly deviant population created the perfect ingredients for economic prosperity. Analysts should not be shocked that criminals built Australia; it is successful precisely because it was populated by socially ambitious criminals.