The Federal Reserve Must Die
by James Quinn. August 25, 2009
“Paper money eventually returns to its intrinsic value ---- zero.” – Voltaire
“The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either. Buying up the bad debt of privileged institutions and dumping worthless assets on the American people is morally wrong and economically futile.” - Representative from Texas Ron Paul questioning Federal Reserve Chairman Ben Bernanke
I’ve read and witnessed various pundits during the Presidential campaign describe Ron Paul as crazy. The corrupt tax and spenders in Congress know their days would be numbered if they followed his vision of government. Ron Paul’s scathing assessment of the Federal Reserve’s primary role in creating the financial crisis and his raking of Chairman Bernanke over the coals is so accurate, truthful and sane that it should blow your mind. Mr. Bernanke must have felt like his head was spinning like a top while Ron Paul gave him a tutorial in basic economics. Mr. Paul’s noble efforts to Audit the Fed (HR 1207) and eventually to rid the country of its insidious control over our lives will bring the pillars of the Federal Reserve building crashing down upon Mr. Bernanke in his mahogany paneled, gold plated boardroom with ornate chandeliers.
The worldwide financial system experienced a 6.8 magnitude earthquake in September 2008. The very foundations of our economy were shaken to their core. The fear exhibited by government officials, politicians, and the public was palpable and real. For a few weeks there was the distinct possibility that the system would come crashing down. A massive printing of dollars by the Federal Reserve, the clandestine buying up of toxic assets by the Federal Reserve, behind the scenes deals with the biggest banks, covert currency swap deals with foreign Central Banks, and forcing the FASB to change accounting rules to allow banks to fraudulently value bad loans, temporarily staved off the final chapter in the 96 year old diabolical experiment in currency manipulation.
The moment when the system stopped functioning was our “Minsky Moment”. Hyman Minsky was an American economist and professor of economics at Washington University. Dr. Minsky put forward theories linking financial market vulnerability, in the normal life cycle of an economy, with speculative investment bubbles produced by financial markets. Minsky declared that in good times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative bubble develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial emergency. As a result of such dangerous debt bubbles, banks tighten credit availability, even to companies with good credit, and the economy enters recession.
This movement of the financial system from stability to crisis is the “Minsky Moment". At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the asking prices previously quoted, leading to a swift and steep collapse in markets and a dramatic drop in market liquidity. What Dr. Minsky failed to address was that the Federal Reserve has been responsible for every financial crisis in the United States since 1913.
A History of Crisis & Political Influence
The Federal Reserve Act of 1913 created the Federal Reserve Bank with the following mandate:
An Act To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.
The original mandate was clearly limited. The idea was that a Central Bank would be able to keep the periodic panics like the Panic of 1907 from ever happening again. It appears that four innocuous words opened up Pandora’s Box and unleashed evils upon all mankind - “and for other purposes”. The bankers who control the Federal Reserve along with their politician protectors have dramatically expanded the scope, authority and influence of the Federal Reserve with each scientifically created crisis that has occurred in the last 96 years. They are attempting to grab more power as we speak.
Since 1913 the Federal Reserve has amassed more and more authority and now has vast responsibility and control over our lives. The Federal Reserve website lists the following functions:
- conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
- supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
- maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
- providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system
By any reasonable measure, the Federal Reserve has failed miserably in all their responsibilities. When organizations fail in a capitalist system, they are supposed to be replaced, not given more responsibility. They are now an immense entity with its insidious tentacles throughout the worldwide financial system.
Arrogance & Incompetence
In 1915, according the Federal Reserve annual report, they operated with 35 total employees. Today, they operate with over 20,000 employees costing $1.4 billion per year. The cost to operate the system exceeds $3.3 billion. With 20,000 of the “best” and “brightest”, you would think someone would have predicted the current financial crisis before it hit. But, no. Ben Bernanke thought the underpinnings of the economy were strong, housing was on a firm foundation, and the subprime issue was confined. This instance of incompetence is just one of many since 1913. When examining the history of the Federal Reserve you realize that it has overwhelmingly been led by weak, pliable, politically motivated men with little or no backbone. Of the 14 Federal Reserve Chairmen, only two could be considered independent and competent. The evidence of political influence, incompetence, and arrogance is conclusive.
Fed Hall of Shame
Marriner Eccles (1934 – 1948)
- Banker and one of the architects of FDR’s Emergency Banking Act of 1933 that vastly expanded the powers of the President and Federal Reserve. It gave the President the ability to declare a national emergency and have absolute control over the national finances and foreign exchange of the United States in the event of such an emergency. The Emergency Banking Act was introduced on March 9, 1933, to a joint session of Congress and was passed the same evening amid an atmosphere of chaos and uncertainty as over 100 new Democratic members of Congress swept into power determined to take radical steps to address banking failures and other economic malaise. The sense of urgency was such that the act was passed with only a single copy available on the floor and most legislators voted on it without reading it. (Hmm. Remind you of any recent legislation?). One-third of all the banks in the country were shut down permanently after the passage, further concentrating banking wealth in a few mega-banks.
- Roosevelt chose him to be Fed Chairman because he agreed to support the massive spending projects to fend off the ravages of the Great Depression. He fully embraced the Keynesian policies of government intervention in free markets to artificially fend off recessions.
- He considered monetary policy, the primary purpose of the Federal Reserve, of secondary importance, and as a result he allowed the Federal Reserve to be controlled by the interests of the President and Treasury.
- During World War II, Eccles pledged to the President to keep the interest rate on Treasury bills fixed at 0.375 percent. It continued to support government borrowing after the war ended, despite the fact that the CPI rose 14% in 1947 and 8% in 1948, and the economy was in recession.
- He was a key architect of the World Bank and International Monetary Fund, which have perpetuated poverty throughout the world while centralizing economic power among a few dominant countries.
Arthur Frank Burns (1970 – 1978)
- Columbia professor of economics who never worked a day in the private sector in his lifetime and possibly the weakest Fed Chairman in history.
- In his book Six Crises, Richard Nixon blamed his defeat to John F. Kennedy in 1960 on restrictive Fed policy and the resulting tight credit conditions and slow growth. After finally winning the Presidency in 1968, Nixon named Burns to the Fed Chairmanship in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.
- Burns appeared to show some backbone and resisted Nixon’s demands, but after negative press about him was planted in newspapers by Nixon’s henchmen and, under the threat of legislation to dilute the Fed’s influence, Burns and other Governors succumbed to political pressure.
- Burns believed that Fed action should try to maintain an unemployment rate of around 4%. Burns’ ultra- loose monetary policies resulted in inflation, which Nixon attempted to manage through wage and price controls. After the 1972 election, price controls began to fail and by 1974 the inflation rate was 12.3%. The annual average rate of consumer price inflation was 9% during his term.
- The single biggest financial event in U.S. history occurred during Burns’ watch. By the early 1970s, as the costs of the Vietnam War and Great Society domestic spending accelerated inflation, the U.S. was running a balance of payments deficit and a trade deficit, the first in the 20th century. Other nations began demanding fulfillment of America’s “promise to pay” — in the form of gold from the U.S., in exchange for paper dollars. The dollar was plunging against all foreign currencies. U.S. gold reserves were being depleted. The world had lost faith in the U.S. government’s will to cut its budget and reduce its trade deficit. To stabilize the economy and combat runaway inflation, on August 15, 1971 President Nixon imposed a 90-day wage and price freeze, a 10% import surcharge, and closed the gold window, making the dollar non-convertible to gold. On that day, the dollar became a piece of paper with no intrinsic value, rather than 1/35th of an ounce of gold. The dollar has lost 93% of its purchasing power versus gold since this fateful decision.
George Miller (1978 – 1979)
- The first Federal Reserve Chairman from private industry who did such a horrible job that he was promoted to Secretary of the Treasury.
- He was a member of the think tank the Club of Rome, which believed the common enemy of humanity is man, so democracy may not be well suited to the tasks ahead. However, the threat of pollution, global warming, water shortages, and famine can be used to fulfill humanity's need for a common adversary. (Sounds like an early version of Al Gore).
- Jimmy Carter selected Miller in 1978 in the midst of an economic crisis. Inflation was running at 6.7% in 1977 and oil prices were soaring. Miller maintained his Krugman-like Keynesian belief that inflation could "prime the pump" of the economy, and would be self-correcting. He pursued a strongly dovish policy and refused to raise interest rates. The effect of this moronic policy was to send the dollar's value spiraling downward. In November 1978, only 11 months into his term, the dollar had fallen nearly 34% against the German Mark and almost 42% against the Japanese Yen.
- In an unprecedented example of his weakness, Miller was outvoted by the Board of Governors at a meeting in 1979 where he opposed an increase in the discount rate. When he was “promoted” to Treasury Secretary in 1979 inflation was out of control, running at 14%. A Federal Reserve Chairman with a backbone, Paul Volcker, applied the shock therapy needed to crush inflation.
Alan Greenspan (1987 – 2006)
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” - Alan Greenspan from an article written in 1966 entitled “Gold and Economic Freedom”
- The quote above would indicate a man whose principles in sound economic theory could not be compromised. That proved to be dreadfully wrong, as Alan Greenspan turned out to be the most political, Wall Street pleasing, bubble inducing Chairman of all time. His reign of power set the stage for the greatest financial collapse in U.S. history.
- He studied economics at Columbia under Arthur Burns, where he must have learned how to buckle to political pressure and please whichever party was in power. His pandering to Washington insiders and Wall Street bankers prove that he betrayed his true beliefs in a strong currency backed by gold.
- Alan Greenspan systematically encouraged changes to the CPI index that have understated it by 4% to 5% for two decades. The result has been to cheat senior citizens of their Social Security income, overstate GDP, and artificially keep interest rates low. The insertion of owner’s equivalent rent, replacing steak with hamburger, and hedonistic adjustments were Orwellian measures used to mislead the American public.
- During his first few years as Fed Chairman he successfully handled the stock market crash of 1987 and George Bush blamed him for losing the 1991 election by keeping monetary policy too tight, causing the 1991 recession. He worked well with Bill Clinton in keeping inflation and interest rates on a downward path, resulting in strong economic growth in the 1990’s.
- Greenspan’s hubris and belief in his own infallibility led him to use monetary policy to “save the world” in 1997 and 1998. During the Asian financial crisis of 1997—1998, Greenspan flooded the world with dollars, and organized a Wall Street bailout of the reckless, irresponsible hedge fund Long Term Capital Management. These choices by Greenspan began two decades of bailing out failure. The “Greenspan Put” became known throughout the world. Everyone on Wall Street knew you could take excessive risk and if your gamble failed resulting in “systematic risk”, Greenspan would flood the system with dollars and save your ass.
- After the Dot.com bubble burst, the Y2K phony scare and the 9/11 attacks, Greenspan committed the worst offence of his 20 year monetary reign of terror. Greenspan initiated a series of interest cuts that brought the Federal Funds rate down to 1% in 2004 and left it at that level for over a year. He purposely created a housing bubble in order to artificially prop up the American economy after the huge stock market losses. The excess liquidity unleashed by Greenspan caused lending standards to deteriorate resulting in the housing bubble of 2004-2006 and the market meltdown beginning in 2008. His loose monetary policy resulted in a plunging dollar, surging commodity prices and humungous trade deficits.
- Greenspan’s unyielding belief in unfettered markets, unregulated derivatives, adjustable rate mortgages for all, home equity extraction as a spending source and subprime lending to poor people combined to cause a financial crisis that still threatens to destroy the American financial system. He denies responsibility for the financial crisis, but his own words condemn him:
“Besides sustaining the demand for new construction, mortgage markets have also been a powerful stabilizing force over the past two years of economic distress by facilitating the extraction of some of the equity that homeowners have built up over the years.” – November 2002
“Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country … With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. … Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.” – April 2005
- Alan Greenspan sold his soul to the devil of Washington DC power and influence. He loved the accolades and headlines he received as the most powerful man in the world. The Maestro could pull the levers and make markets do as he wished. The man who knew that Federal Reserve manipulation caused the Great Depression disregarded his own words and caused the worst economic calamity since the Great Depression.
"When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom." - Alan Greenspan from an article written in 1966 entitled “Gold and Economic Freedom”
Ben Bernanke (2006 - ?)
- Harvard trained economist who has spent his entire life in academia and government service. As an “expert” on the Great Depression, Dr. Bernanke is 100% wrong in his assessment of its causes. He believes the Depression was caused by the Federal Reserve reducing the money supply in the early 1930’s. He should talk to the Alan Greenspan from 1966. The Federal Reserve caused the Great Depression through its easy money policies during the 1920’s. The expansion of the money supply led to an unsustainable credit-driven boom. (Hmm. Does this remind you of any similar instances?).
- In his famous 2002 “Helicopter Ben” speech, Bernanke previewed exactly what he would do as Federal Reserve Chairman in the current economic environment. Read his words carefully because he has followed the script to the tee. He has printed over a trillion dollars in the last year. Tax cuts have been rolled out. The dollar is being devalued. The only thing left is confiscation of gold. Is that next? :
“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
“Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly.”
“A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.”
- Despite his Ivy League education and all of the supposed brilliant resources at his disposal, Bernanke has shown a remarkable ability to not see the housing bubble or the collapse of the financial system. He was convinced in 2005 that the housing market was strong and healthy. He was sure that the subprime problems were confined and would not spread into the greater economy. He now assures the public that he will know the proper time to withdraw the monstrous amount of stimulus he has pumped into the world economy before hyperinflation takes hold. Does his track record give you comfort that he will correctly figure out the right time to withdrawal the stimulus?
- Bernanke and Hank Paulson used their positions of power to force Ken Lewis, the CEO of Bank of America, to follow through on their acquisition of Merrill Lynch and to withhold knowledge of billions in losses from shareholders and the public. They threatened to remove Lewis as CEO if he did not agree. The SEC should be investigating this cover-up, but is not.
- After promising a more transparent Fed, Bernanke has done the complete opposite. He continues to withhold the names of all financial institutions that have borrowed from the Fed and will not reveal the worthless collateral that they have put up for those loans. The Fed has lent in excess of $2.2 trillion to banks. The Fed has refused to reveal any information regarding these loans. Bloomberg News has sued the Fed under the Freedom of Information Act to force them to reveal where $2.2 trillion of taxpayer money has gone. Investment Manager Ted Forstmann’s opinion was, “It’s your money; it’s not the Fed’s money. Of course there should be transparency.”
- Representative Ron Paul has introduced HR 1207 which would have the GAO audit the Federal Reserve every year and issue a report to Congress. Every public and most private companies have an annual independent audit. It is a reasonable and smart thing to do. Operational weaknesses and fraud are often uncovered in these audits. The bill has 282 co-sponsors. Mr. Transparency Ben Bernanke wants no part of getting audited. Operating in the shadows is preferable. His reasoning is laughable. The Fed has proven to be anything but independent, stability is not the first word that comes to mind when discussing our financial system, and the dollar has lost 95% of its purchasing power since 1913.
Inflation, Instability, Crisis, & Collapse
The United States grew rapidly for 120 years with virtually no inflation. With the creation of the Federal Reserve in 1913, the inflation genie was let out of the bottle. Nixon’s closing of the gold window in 1971 unleashed a tsunami of inflation, covered up by statistical manipulation by the Fed and government.
For those who prefer seeing what real things cost, below is a chart with some key financial items for the average person. If it feels like your family has fallen behind since 1971, you’re right. Your pay has not come close to keeping up with the cost of a new house, a new car or gas to fill up that car. This is why it takes two parents working to just to keep up with inflation.
|Average Cost of new house||$28,000||$314,000||1121%|
|Median HH Income||$10,300||$58,700||570%|
|Average Monthly Rent||$150||$730||487%|
|Cost of a gallon of Gas||$0.40||$2.80||700%|
|Average New Car Price||$3,430||$28,000||816%|
|United States postage Stamp||$0.08||$0.41||512%|
The 14 men who have occupied the position of Federal Reserve Chairman should have occupied the office with a huge dose of humbleness. The complexity of financial markets makes it impossible for anyone to pull the levers of monetary policy in order to generate the result that you wish for. Humans are incapable of understanding the millions of interactions the makeup world commerce. The Federal Reserve cannot control the emotions or irrational behavior of investors. The Federal Reserve mandate of moderate long-term interest rates has clearly not been met. The Fed Funds Rate has plotted a path of extremes over the decades, ranging from 0% to 19%, not exactly stable. The Federal Reserve has consistently set rates too low, leading to credit bubbles, which always end in recession or depression. Free market pricing would not be manipulated or influenced by political considerations or agendas.
The mandate of maximum employment has also been a miserable failure. The easy credit policies of the Federal Reserve during the 1920’s led to the Great Depression with unemployment rates exceeding 20%. Unemployment has averaged between 5% and 10% consistently since the formation of the Federal Reserve. Government bureaucrats have attempted to hide the true rate of unemployment through the use of deceptive categories and changing the rules of the game.
True unemployment, consistent with the way it was measured during the 1930’s, is currently over 16%. This level of “maximum” employment is due to the policies of the Federal Reserve.
The facts prove beyond a shadow of a doubt that the Federal Reserve has failed in every one of its mandates. Inflation has destroyed the value of the dollar. Interest rates and employment have been violently erratic. The Fed has been manipulated by politicians, showing a complete lack of independence. The incompetence and arrogance of the other Chairmen have brought the country to its knees. The final chapter is about to be written.
There have been 18 recessions since the creation of the Federal Reserve, including the worst Depression in the history of the country and today’s ongoing Depression which will set records of its own. Most have lasted 12 to 14 months with a decline in Real GDP of 2% from peak to trough. The amount of fiscal and monetary stimulus as a % of GDP generated by the Federal Reserve and politicians during these recessions has averaged 2.5%, excluding the Great Depression and the recent recessions.
The stimulus response by Herbert Hoover and the Federal Reserve to the economic collapse of 1929 – 1933 was unprecedented at 8.3% of GDP. This was to combat a 27% decline in real GDP. George W. Bush and Alan Greenspan almost reached that level of stimulus at 7.2% to combat a 0.2% decrease in real GDP in 2001. That excessive response ultimately produced the housing bubble and today’s far worse financial crisis. Excessive is too mild of a term to describe the response by George W, Barack O, and Ben B. to the current downturn. Real GDP has declined by 1.8%. In 1953 the economy suffered a 2.7% real decline in GDP. The Eisenhower Administration did nothing. Miraculously, the economy recovered. The fiscal stimulus response to our 1.8% decline in GDP has been 29.9% of GDP. Our downturn has been 1/15th the decline of the Great Depression and our Keynesian response has been 3.6 times as great. If you were to add all of the guarantees by the Federal Reserve, FDIC, and Treasury, the response has been 12 times larger than the response to the Great Depression. This historically excessive response will have unintended consequences. It always does.
|Length||Decline in||Stimulus as a % of GDP|
Source: Grant’s Interest Rate Observer
“The way the system is supposed to work, when times like this come, the solid people, the competent people, take over the assets from the incompetent people and then you start over again from a sound base, this is what South Korea did, this is what Russia did, and they did fine. What they’re doing this time is they’re taking the assets away from the competent people and giving them to the incompetent people and saying now you compete with the competent people with their assets and their money – it’s terrible economics and it’s not going to work, it hasn’t worked before and it’s not going to work this time. The way the system is supposed to work is when you make a mistake you go broke, he refused to let people go broke, he saved his friends and now we’re all having to pay for them.” – Jim Rogers
The moral hazard created by the Federal Reserve’s and the government’s response to every financial difficulty faced by banks and corporations have left our financial system teetering on the brink of collapse. Our largest banks are insolvent. Over 300 smaller regional banks will fail in the next year. Our National Debt is approaching $12 trillion and will surpass $15 trillion by the end of Obama’s term. Foreclosures will exceed 3 million this year. Almost 50%, or 25 million homes, will be underwater on their mortgage loans by 2011. It has gotten so bad that it takes the leader of a socialist country to provide capitalistic free market common sense to American leaders:
“This crisis did not come about because we issued too little money but because we created economic growth with too much money and it was not sustainable. If we want to learn from that, the answer is not to repeat the mistakes of the past.” – Angela Merkel
“You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.” – George Bernard Shaw
Our fiat currency system has proved to be a wretched failure. Within the next five years a final crisis will bring an end to this diabolical experiment in hubris. Man is not smarter than the free markets. The U.S. dollar is a piece of paper. It only has value because people have trust that the government issuing the paper is financially stable with rational fiscal policies. This does not describe the United States of today. When the next crisis causes the dollar to collapse and uncontrollable inflation to result, abolition of the Federal Reserve will become feasible. Average Americans have been victims of the boom and bust caused by the Federal Reserve policies. The sole beneficiaries have been bankers, politicians, the military industrial complex, and the super rich elite.
Journalist H.L. Mencken understood overbearing government, the ignorant masses and the power of a few brave men:
“All government, of course, is against liberty. The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary. Most people want security in this world, not liberty.”
“The most dangerous man to any government is the man who is able to think things out... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable. It doesn't take a majority to make a rebellion; it takes only a few determined leaders and a sound cause.”
The abolition of the Federal Reserve will not be without a ferocious, possibly deadly, fight. Without a fiat currency, Democrats would not be able to tax and spend on their social program agenda. Republicans would not be able to tax and spend on their beloved military industrial complex and the wars it encourages. A sound commodity backed currency would force government to become smaller and dramatically reduce the obscene profits of bankers. A commodity backed currency would favor saving and investment versus borrowing and consuming. If there is one thing that should have been learned in the last two years is that an unsustainable trend will not be sustained. The actions taken by the Federal Reserve and the Obama Administration have created an unsustainable situation for the U.S. dollar. Representative Ron Paul makes the most persuasive case for abolishing the Federal Reserve:
“The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts. With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.
Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.
Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.
In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.”
We have a sound cause. It only takes a few determined leaders to start the rebellion.
Join me at The Burning Platform to fight the Fed.
© 2009 James Quinn
Bio: James Quinn is a senior director of strategic planning for a major university. These articles reflect the personal views of James Quinn. They do not necessarily represent the views of his employer and are not sponsored or endorsed by his employer. He can be reached at firstname.lastname@example.org.