The Federal Reserve Is Different — and That Difference Is the Error
The Federal Reserve is routinely described as “independent,” “technocratic,” or “above politics.” These are not neutral descriptors. They are rhetorical shields. What they obscure is simpler and more troubling: the United States does not issue its own money as a sovereign act.
It rents it.
The power to create money is the most elemental expression of state authority. It determines what counts as value, how exchange is mediated, who receives liquidity first, and who bears the cost of contraction. Historically, this power has always belonged either to the sovereign directly or to a transparent public authority accountable to it. When monetary authority is separated from political responsibility, the result is not neutrality. It is unaccountable rule.
The Federal Reserve is not merely independent. It is structurally opaque by design. Its regional banks are organized as private corporations whose member banks hold stock and receive dividends. Its balance sheet is immense. Its decision-making is insulated. Its internal deliberations are largely inaccessible. The public encounters the Fed through staged signals, press conferences, and delayed minutes — not through democratic control.
This is not how a republic manages its currency.
Monetary authority in the United States has been deliberately placed beyond ordinary political reach and then relabeled as “independent,” as though distance from accountability were a virtue rather than a warning sign. What is called insulation operates as removal from meaningful scrutiny. What is called independence functions as immunity.
A system that cannot be clearly described, clearly located within constitutional authority, or clearly held to account is not stabilizing. It is fragile — and it remains intact only so long as confidence is maintained.
The Federal Reserve issues the world’s reserve currency through a hybrid structure that is neither fully public nor honestly private. Its profits are remitted to the Treasury only after its own balance-sheet priorities are satisfied. Its emergency powers allow it to create trillions of dollars in liquidity, select winners and losers, and reshape markets — all without a direct electoral mandate.
This arrangement would be unthinkable in almost any other domain of sovereign power.
No one would tolerate a quasi-private military. No one would accept a partially privatized judiciary. No one would defend a regulatory authority whose power derived from a blend of statute and private ownership. Yet monetary authority — more consequential than any of these — is treated as an exception.
The justification usually offered is tradition. But the history invoked is selective and misleading. Early American debates over central banking were not endorsements of permanent financial autonomy. They were warnings. The First and Second Banks of the United States were controversial precisely because they blurred the line between public authority and private financial interest. Their critics did not fear inefficiency. They feared capture.
Those fears were never resolved. They were deferred.
The modern Federal Reserve is the institutionalization of that deferral — the normalization of an arrangement that places public money creation at the center of a private banking system, buffered from democratic pressure, judicially sheltered, and culturally sacralized as too important to question.
Opaqueness is not a flaw of this system. It is the feature that allows it to persist.
When power is exercised in the open, citizens demand justification. When it is exercised behind complexity, they are instructed to trust the experts. Over time, trust replaces consent, and expertise replaces accountability. The system comes to govern economic life without ever fully acknowledging that it governs at all.
This inversion is now visible even in discussions of basic accountability. Courts seriously debate whether a sitting Federal Reserve governor may be removed when credible allegations of personal misconduct are involved — including conduct directly related to the financial system the Fed oversees.
That this is treated as a difficult constitutional question is itself revealing.
In any ordinary agency, arrest for serious crimes — fraud, corruption, even murder or treason — would result in immediate removal. No one would describe that as an attack on institutional independence. It would be called governance. Yet with the Federal Reserve, even the prospect of accountability is framed as destabilizing, as though the institution’s legitimacy depends on the personal inviolability of its officials.
Once this is seen clearly, the supposed constitutional mystery dissolves. Independence has never meant immunity. It has always meant insulation from policy disagreement — not protection from misconduct or criminality. A system that cannot tolerate the removal of a compromised official without existential anxiety is not strong. It is brittle.
The Federal Reserve is treated as different because confronting it honestly would require admitting something far more unsettling: that a republic outsourced its monetary sovereignty and then built an entire financial order on the assumption that this outsourcing was not only acceptable, but virtuous.
It is neither.
Many modern systems persist not because they are coherent, but because too much depends on them to permit scrutiny. Questioning them threatens not just policy outcomes, but shared assumptions about order itself. And so incoherence is tolerated, opacity is rationalized, and exceptions become permanent.
The Federal Reserve is preserved not because it is sound, but because exposing its contradictions would reveal how much of the financial system depends on not looking too closely.
That is not stability.
It is managed belief.
And belief, once strained far enough, does not fail gradually.
It fails all at once.