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Argument for Repeal of the Federal Reserve Act of 1913.
January 16, 2011
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Repeal Federal Reserve Act of 1913.

Vic Biorseth, Sunday, January 16, 2011

There was never a good reason for the US government to delegate its Constitutional power to coin money and print paper currency, or to create any banking cartel, or to “protect” large banks, or to try to control any boom – bust economic cycles, or to set or control interest rates. Interest, like wages and prices, are best determined by free market forces and the law of supply and demand, as applied to money. Maintaining a stable money supply, keeping the nation’s books in order and up to date and protecting the nation’s treasure is the responsibility of the Secretary of the Treasury, not any private banking cartel to whom it may be delegated. Private banking is not the business of government. Controlling the economy is not the business of the government. Saving failing financial entities is not the business of the government.

There is no such thing as a financial institution or a private business entity that is “too big to fail.” Never was; never will be. No bankruptcy or other failure of any private enterprise is the responsibility of the innocent American tax payer, and American treasure should not be expended to bail out any business. Government has no proper business interfering with private business, and no private enterprise or cartel of them has any business controlling American national treasure in any way. Any bank that holds American national treasure has a fiduciary responsibility to protect those funds the same as similar funds of any private or public customer of the bank.

At the heart of the matter is the question of whether the American federal government is empowered, instructed and limited by the United States Constitution to govern America, or to run a cartel of private banks.

I submit that Congress violated its own responsibility and the trust of its constituency by simply delegating government authority to coin and print American currency, and it created an unhealthy relationship between “private” banking captains and “public” (government) authority. Nothing good comes from such relationships, which historically typify Fascist government relationships with private industry. The bank(s) involved no longer have bank shareholder, owner or depositor-borrower interests at heart, but submerge those more proper interests beneath “public” (government) interests. At some point it becomes impossible to tell whether the bank manager is a for-profit business man competitively providing services to depositors and borrowers, or just another government bureaucrat answering to a Führer.

The claim that the Federal Reserve exists to “smooth” economic boom-bust cycles is a lie. It is a falsehood. Here’s what I said about it in the 2008 Financial Crisis page:

The US Government’s Role in the Great Depression

In the West, during the period between the two Great Wars, the intellectual fad, the raging, popular topic of the cocktail set was, of course, the theories of Marx and hot Socialism, which continued to make inroads into intellectual thought, in Europe, England and America. By the time of the great depression, the stage had been set to begin the change from a “government of the people, by the people, for the people” (Abraham Lincoln, Gettysburg Address, 1863) to a new “government of the people, by the government, for the elite liberal intellectuals.” The great depression was universally blamed on the “failure” of free market Capitalism as an economic system, and provided “proof” of the need to replace it with a more Socialist, planned economic system. Of course, we know now that the great depression, which began in America,

  1. was directly caused by government economic intervention under President Hoover (Ref. America's Great Depression, Murray Rothbard, Richardson & Snyder, 1963; Chapter 7 - Prelude to Depression: Mr. Hoover and Laissez-faire), and

  2. by later action and inaction of the Federal Reserve Board (Ref. Free To Choose, Milton & Rose Friedman, Chapter 3), a government agency, which directly caused the huge chain of bank failures,

  3. was greatly prolonged and aggravated by further intervention of President Roosevelt, and

  4. had nothing whatsoever to do with any failure of free market Capitalism as an economic system, such failure never having occurred.

It should be stated here that these facts, which are not in question today, were not available or known at the historical time of the depression. For instance, when John Maynard Keynes wrote his General Theory of Employment, Interest and Money, he believed that Capitalism had failed. Ironically, the myth that private enterprise, which included private banking, had failed and caused the depression created the political environment favorable to causing the Fed, which itself had actually caused the national banking catastrophe, to gain greater control over the regional banks, to gain new and more prestigious offices and titles, and to grow (Ref. Free To Choose, Milton & Rose Friedman, page 89).

Be all that as it may, these events had a profound effect on the American public, whose perceptions changed dramatically regarding their view of private enterprise and the role of government in their lives. It became widely held that government had to play a more active role in stopping what was then seen as dangerously irresponsible and unregulated private enterprise.

Most Americans believe that the great depression started when the New York Stock Market crashed on Black Thursday, October 24, 1929; but, while it didn’t help matters, it certainly did not cause the great depression, nor did it signal the failure of Capitalism. The crash reflected growing economic problems, burst an unsustainable speculative bubble, and went far toward spreading uncertainty and pessimism, but, had it not been for direct government intervention, the crash itself would have been of little historical note.

But President Hoover was the first, unfortunately, of many American presidents to set his course unerringly toward the violation of all of the laissez-faire cannons (Ref. America's Great Depression, Murray Rothbard, page 168), which had saved the day for our economy in all depressions and panics previous to 1929. These included the first great depression of 1829, the panic of 1837, and the depression of 1920-1921, which was our last “natural” recovery to full employment. Any government spending, no matter what label may be attached to it, is solely consumptive, and any reduction in it will raise the economy’s investment to consumption ratio. Therefore, the only proper action of government during any recession is to cut the budget, and leave the economy strictly alone.

Hoover, however, launched a horribly expensive and truly revolutionary program of government planning and intervention; he bolstered wages and prices, expanded credit, propped up weak businesses, and dramatically increased government spending with new government subsidies for unemployment and public works - all programs, by the way, which are usually thought of as “FDR New Deal” programs. Then, faced with the twin problems of an ever deepening depression and an ever growing $2 billion deficit, when he should have cut the budget, he raised taxes. Homelessness became rampant. The many new hobo-jungles and teeming shanty-towns of the day were aptly named “Hoovervilles.” When Mr. Roosevelt took office, after three and a half years of increasing depression, with 25% unemployment, huge bread lines and no relief in sight, he simply elaborated on Mr. Hoover’s policies and dramatically increased government spending, planning and intervention, to an unprecedented level. This marked the birth of American neosocialism.

Actually, I now believe that American neosocialism began earlier, under Wilson, and the Federal Reserve Act was a major part of that transformation. It helped set the stage for the government-induced economic catastrophe of 1929. Shortly after the market crash, which should have been seen as nothing more than a speculative bubble burst, and should have been left alone, the government “took charge” and made things worse. One morning, the blaring newspaper headlines read “President Orders Banks Closed!” Ordering any private enterprise to close should be something beyond the authority of any American President. But, you see, we now had a Fed, and it was virtually owned by the sitting President.

So we had businesses going belly-up, rocketing unemployment, and closed banks. People couldn’t even get access to their savings. They had no income, they couldn’t meet their bills, including their mortgage payments, and they couldn’t even access their own money, because the banks were closed by government order. Which caused more businesses to fail, and more unemployment, and more foreclosures, and more homelessness, and longer soup lines.

None of it was necessary.

Today, we still have vestiges (vestiges hell, we have monstrosities) left over from that interventionist-era still contributing to future economic calamities. Fannie Mae and Freddie Mac, given life during this era, are alive and well, heavily protected by the sitting government, still making bad loans to people who cannot pay them back, still creating future economic bubbles to burst on into future decades, again and again. These government invented entities exist for the sole purpose of making bad loans. Their true but hidden purpose is to contribute to the eventual destruction of our economy.

Does it make any sense to you that an appointed bureaucrat – a Chairman of the Federal Reserve – should have more oversight and more authority over American government treasure than the American Congress, or than the American Secretary of the Treasury? That’s funny, it doesn’t make a lot of sense to me either.

In my opinion, we never should have gone off of the Gold Reserve, and the Federal Reserve Note never should have come into being. Now, we need to do the work needed to destroy this monster before it destroys us.

That’s my opinion. What’s yours?

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