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SECRETS OF THE FED High Priests of t Money Supply This publication is available in microform from University Microfilms International. Please send information about these titles: Name Company/Institution Address City State Zip Phone \( Call toll-free 800-521-3044. Or mail inquiry to: University Microfilms International, 300 North Zeeb Road. Ann Arbor, MI 48106. blacks in Houston has been on the character of delivery of government services. The city of Houston was for decades infamous for its police brutality, borne out by the large number of minority suspects killed by the police. While in the early 1980s the political influence of black voters had brought the city a black police chief and better police behavior, in many other areas black Houstonians still endure discrimination in services or no redress for past service discrimination. Historically, much of Houston’s waste has been dumped in or near minority neighborhoods. Houston’s oldest garbage dump is in the black Fourth Ward area. Between 1953 and 1978 a total of 21 solid waste sites were authorized by the Texas Department of Health for the Houston area. Of these, 11 were located in or near black areas, though blacks occupy less than 20 percent of residential space in the city. In addition, all five garbage incinerators operating in Houston from the 1920s to the 1970s were located in black or Hispanic neighborhoods. Bullard’s data point to a neglected dimension of being black in America the environmental degradation and pollution one must endure. Blacks in Houston, as in other Texas cities, still face many everyday barriers that white Texans do not. Bullard’s welldocumented analysis demonstrates the ways in which these discriminatory barriers interfere with black life chances and require the devotion of excessive energy to the problems of making a living and raising a family. Texas politicians need to get off their duffs and begin to address the deep and painful problems confronting the millions of minority families in all Texas cities. As Bullard’s analysis suggests, a full employment and job training program would be a major start. BY RANDALL DODD SECRETS OF THE TEMPLE: How the Federal Reserve Runs the Country By William Greider New York: Simon & Schuster, 1987 798 pages, $24.95 IN THE EARLIEST years of public school we are taught about the checks and balances in the U.S. Constitution. We are also taught how laws are proposed, approved, and \(if not judged how the members of the three legislative, executive, and judicial branches of government are elected by the people or appointed by elected officials. But we are not taught about the Federal Reserve System. the pillars of government. Its determination of interest rates and money supply is on par, in economic importance, with the Administration’s fiscal policy. Yet, the workings of the Federal Reserve Board have remained beyond public attention, or what is worse, shrouded in mystery. As a result, there is a gap in the public’s knowledge of the workings of its government. Secrets of the Temple is a book that can fill in that gap. The book is about the Fed’s structure and history; it is a readable treatment of a complex subject. William Greider explains who runs the Fed, how its officials are selected, and how Fed policy affects the economy and hence politics and our lives in general. At the same time, Greider takes us through a populist view of the history of the Fed from its creation out of the banking crisis of 1909 to its role in the banking crisis today. The Federal Reserve is the central bank of the United States. It consists of 12 regional Reserve Banks, one of which is in Dallas, and its ruling Board of Governors in Washington, D.C. The Board consists of seven governors who are appointed by the President, and confirmed by the Senate, to 14-year terms. From these, the President appoints a Chairman to a four-year term. Randall Dodd, a University of Texas graduate, is completing work on a Ph.D. in economics at Columbia University. The Board has authority over the discount rate and the ratio of reserves to deposits at banks, and it supervises a number of banks. The most important element of monetary policy, open market operations, is controlled by the Federal Open Market Committee. The 12-member committee includes the seven governors plus five of the presidents of regional Reserve Banks. Open market operations is where the Fed buys or sells government bonds and thereby adds or subtracts money from the banking system. Adding money tends to both lower real interest rates and raise the likelihood of inflation. The only other place to learn this is in the “Money and Banking” course usually taught to economics majors during their junior or senior year of college. I have tried, a few times, to teach this course and found that the textbooks focus mostly on modeling the economic impact of monetary policy. Only the most basic of discussions of history, selection of officials, and the political role of the Fed are offered up in these classes. Greider’s book, used in conjunction with a basic Money and Banking text, could usher in a new era of politicalfinancial education. The controversy that has risen over this book stems from its detailed descriptive analysis of the Fed’s role in breaking and making inflation, and thus breaking and making Carter and Reagan, in the late ’70s and early ’80s. Greider’s book has shaken one of the fundamental dogmas of economic thinking. He suggests that inflation is, or at least can be, good for the people. This implies that bringing down inflation, called disinflation, can be bad. His argument, in brief, is as follows. The by controlling the rate of growth of the money supply. This also affects interest rates. The Fed pursued rapid money growth during the 1970s as part of the government’s full-employment policies. The resulting inflation helped workers and poor people and hurt rich investors. Workers benefited from lower unemployment as it increased job security and helped workers successfully increase wages faster than the rate of inflation. Insofar as workers had to borrow 18 MARCH 25, 1988