The former St Louis Fed president, William Poole, now consultant for California-based Merk Investments, made an interesting statement on the Fed policy tradition. In an interview with Germany's n° 1 daily, the Frankfurter Allgemeine Zeitung, Poole stated:
"In historical perspective inflation is a means to diminish the stress felt by debtors. The policy of the US central bank is construed to create inflation to alleviate that stress. Its monetary policy was, is, and will be "lax" until the economic situation, and the situation of financial firms, will be improved. All in all this will entail an inflationary tendency, even if the latter will entail a bundle of new problems in another three or four more years."
Poole here confirms the Austrian interpretation of what central banking is all about: special-interest policy in the short run, with harmful aggregate consequences in the medium and long run. Significantly, Poole made this statement only after he had left the Fed (he quit in March).
That is the most forthright statement of the mission of the Fed I've ever read. It acts as all with monopoly over the money supply always have - to alleviate the debt of the state. In the case of our Federal Reserve it also acts to bail out the financial institutions that are its patrons and owners - banks. Inflation is the only tool at its disposal and it uses that tool benefit the elites even as it impoverishes the masses.
Those who call incessantly for higher taxes on the wealthy to alleviate inequality will never reach their goal because they are not addressing the root cause of the inequality. As long as we have a central bank whose mission is to "diminish the stress felt by debtors" we will continue to accrue more debt by the government, financial institutions and individuals. Poole openly acknowledges that two of our most pressing problems - inequality and excess debt - are a result of the deliberate actions of the Federal Reserve.