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5:54p ET Monday, January 7, 2002

Dear Friend of GATA and Gold:

Here's the report about the
Nader-sponsored conference on the Federal Reserve
held at the Washington Press Club today. If you
caught the proceedings on C-SPAN2, you might have
seen GATA Chairman Bill Murphy, who was shown
asking a question of the Washington editor of
Barron's, Jim McTague. Another delightful moment
came with the presentation of Cindy Artis, former
executive secretary to Fed general counsel Virgil
"The FOMC Transcripts Are Lying About Gold Swaps"
Mattingly, who reported being more or less fired
for joining a labor complaint that made Mattingly
feel "uncomfortable." Let's hope his discomfort is
only beginning.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Greenspan has done enough, critics say;
elitist policies have hurt, now is time
for public spending

By Rex Nutting
Monday, January 7, 2002

WASHINGTON -- During a day devoted to unbridled
criticism of the Federal Reserve and its chairman,
Alan Greenspan, perhaps the most damning
assessment of the "maestro" is that he and his
central bank have become irrelevant to the
economy's recovery.

At a conference sponsored by Ralph Nader on
Monday, economists, labor leaders, journalists,
and other critics, mostly from the left, attacked
the Fed as a secretive, undemocratic, and elitist
institution that has hijacked economic policy
making from our elected leaders with barely a
whimper of protest.

Nader, the 2000 Green Party candidate for
president and the founder of numerous Washington
watchdog groups, said he organized the conference
to discuss "why this agency has gotten a free
pass, time and time again" from Congress, the
executive branch, and the media.

"Greenspan's career has been shielded from close
scrutiny by an adoring cadre of adoring financial
journalists and a Congress which treats the
Federal Reserve chairman more as a deity than as a
public official," Nader said.

But Greenspan was hardly coddled at the sparsely
attended conference that was televised on C-SPAN.
Speaker after speaker took turns painting a
picture of the Fed as an institution far out of
step with American values.

While many of the speakers gave Greenspan credit
for bucking the conservative economic mainstream
by allowing the economy to grow faster than 2.5
percent in the mid- to late 1990s, they also
heaped blame on him for accommodating the excesses
of the stock market bubble and for fighting a
phantom inflation.

"Alan Greenspan became the patron saint of the
Enron economy, this rapacious, snake-oil culture
which ran worthless stock to dizzying heights and
got, as P.T. Barnum used to say, a sucker who was
born every minute into the game," said Jeff Faux,
president of the left-leaning Economic Policy

Faux said Greenspan helped "snooker" President
Clinton and the Democrats into abandoning the
immediate needs of their constituency of working
Americans in a vain attempt to pay off the debt of
the Reagan and Bush I presidencies, only to find
Bush II giving away the hard-won surplus to the
Republicans' constituency with a big tax cut.
Greenspan met with President Bush and his economic
team in private on Monday to discuss measures to
restore growth.

"The Fed is quite willing to muck around in
politics," said William Greider, national affairs
correspondent for The Nation and the author of the
classic book on the Fed, "The Secrets of the

Greider said the long bull market that began in
1982 and extended until 2000 is now over because
the Fed's policy of wringing out inflation has
gone as far as it can. The Fed's policy was based
on maintaining a high level of unemployment that
would pressure workers to accept lower wages, he

"Whether that was the right thing to do or not, it
has profound consequences that feeds the
inequalities" in wealth and income, Greider said.

A generation of American workers has gone without
any wage increases at all (in inflation-adjusted
terms) due to the Fed's policies. Yet such a far-
reaching policy decision was largely made without
any public debate at all.

"Bad things happen in democracies when large
institutions are excluded from debate," Greider

The debate over the history of the Fed belongs to
the academics, said James Galbraith, an economics
professor at the University of Texas. Galbraith
said recessions don't belong to the Fed chairman
or to the presidents or Congresses whose policies
led to the slump but rather to those who have the
responsibility of digging us out of the ditch.
"The scene of action and of responsibility has
shifted to the president and Congress," Galbraith
said. Greenspan, he said, "has simply lost

Galbraith believes the slump will be long-lasting,
with the economy running below full employment for
at least three years.

"The private sector is tapped out," Galbraith
said. "It will take time" before households and
businesses are willing to spend on durable goods
again, before banks have absorbed their losses and
are willing to lend again, and before investors
"discover the next new thing," he said.

"Monetary policy, in short, loses effect when you
need it most," Galbraith said. "This is an
institution that has failed the country."

What's needed is not lower interest rates or lower
taxes (which would have no impact on boosting the
economy now) but more public spending, Galbraith
said. "Modest budget deficits are normal."

Paraphrasing John Maynard Keynes, Galbraith said,
"There are things to do. There are people to do
them. Why not bring them together?"

Galbraith said the federal government should
transfer billions of dollars to state and local
governments to allow them to maintain high levels
of spending on essential services like education,
health, and transportation.

As for the Fed, Galbraith called for a
congressional investigation into why the Fed's
army of economists failed to forecast either the
stock market bubble or the recession, and to find
out why the Fed kept raising interest rates into
2000 to fight "purely imaginary, purely illusory

"For people with such imaginations, there are
better institutions than a central bank," he said.


Rex Nutting is Washington bureau chief of