Low and behold, the Federal Reserve Bank of Dallas holds tours on Tuesdays and Thursdays of most weeks. And as much of a chore as it is to travel to Dallas, pay $1.50 for each half-hour of parking, and avoid the 77 potholes on every mile of downtown street, I didn’t pass on touring my local Death Star as part of a brigade organized by the local Campaign for Liberty.
I had an idea of what to expect: opulent offices, grand statues and lots of money. Lots of it. I got to see old money, clean money, dirty money, priceless money, fake money. The new money is printed in Ft. Worth, I hear. I did see one statue in the main lobby of a pair of oxen (I believe) and a farmer plowing a field, symbolizing the productive wealth it’s responsible for tearing up, I guess. The lobby was even grand, with high echoing ceilings and expensive stone tables and glass desks.
However, like much of what you find true of government, you find true of the Fed. Once they let you past the gatekeepers, in this case the private Federal Reserve Police Force, there’s not much to impress. The short video we watch explained the workings of the Fed’s 12 branches, its regulatory role over other banks, and–get this–how the Fed stabilizes prices. You got that? No less than seven different times did the video say the Fed stabilizes prices and that it is responsible for maintaining confidence in the monetary system. The video offers an odd rationale for its practices. Apparently, economies suffer from fundamentally opposing forces: price inflation, or when there are too many dollars in the system, and recession, when there are too few dollars in the monetary system. I’m sure we’ll never suffer from the latter as the Fed may freely prints money as it pleases.
After the video, we visitors, about 20 in all, went in depth with questions to senior Fed economist Ken Robinson, who aided the tour group. I did get in two questions. First I asked, “Looking at the numbers the St. Louis Fed puts out, the prospects for price inflation can seem pretty scary. So how does the Fed predict prices will react?” He thought prices would stay flat over the next year, but the tricky part would be removing the “liquidation” from the system before prices started rising. I thought, good luck with that.
Secondly, I wanted to know what responsibility he thought the Fed had in the emptying purchasing power of the dollar and the severe recessions since its inception in 1913. He said, “There is no doubt that in the 30s, the Fed made things worse.” He also mentioned the price inflation of the 1970s as a bad time in the Fed’s short history, but that “since the the late 70s the record has been good and it looks like the record is getting better.” I sure hope he is right on both accounts, but I doubt it. Past the lobby, the first floor area that we toured was lackluster by comparison. The carpet in the video screening room was something you’d find in a shabby manufactured home. The money shredding machines we passed were the same olive and tan colors you would expect on appliances in the early 1980s. The shredding office computer’s DOS prompts were a real flashback. Finger print smudges and palm prints littered the glass cases.
The important thing to remember about the Fed is that it is an independent agency of the government, and each of the 12 member branches are private non-profit organizations. So though the Fed chairman is often referred to as the most powerful person in the world, he actually has less accountability than a grocery store clerk. All the business done at a day at Walmart is a rounding error for these guys. The billions made each year from its check clearing operations and loaning of available funds are used to fund its research and regulatory operations.
All in all, I encourage as many people as possible to visit. If nothing else, it gives me hope that the Fed is not as mighty as someone might think. The people working there are very friendly, “just following orders,” no doubt. Yet economics teaches us that it will end, of course, in failure as all economic interventions do. Will it will end on its own terms and cause less harm? Or will it will end in some financial panic? For everyone’s sake, I just hope it’s sooner rather than later.