The Federal Reserve Is Bad For America

"The Federal Reserve System was created by the Federal Reserve Act in 1913 . . . an unusual mixture of public and private elements." — from the Fed's website.

"Quantitative Easing" belongs in the restroom.

It's a little ironic that the American Left, who are so quick to cry "Fascism" whenever Republicans are business-friendly, should now be such supporters of the unholy alliance of Big Government and Big Banking we call the Fed. It may have seemed like a good idea a hundred years ago—Woodrow Wilson was just full of "good ideas" like, y'know, the Income Tax, and Direct Election of Senators (16th and 17th amendments). For the purposes of this discussion we'll not delve into Wilson's (and the Democrats' and Princeton University's) alignment with the Eugenics Movement . . . except to note that sterilization and euthanasia are the unavoidable conclusion of Progressivist logic; abortion-on-demand being its most widespread achievement to date.

The same hubristic mindset that gave us the "unsinkable" Titanic in 1912 also gave us Woodrow Wilson and the Federal Reserve System the following year. The Progressive Movement was in full flower, seeing no limit to what human reasoning and the Scientific Method could deliver. But artists, those canaries in society's coal mine, painted a darker picture—like Marcel Duchamp's 1912 Nude Descending A Staircase, which scandalized New York's 1913 Armory Show. This was also the era of Cubism, Dadaism, and Nihilism . . . which together foretold Friedrich Nietzsche's Will To Power. Of course it's pure coincidence that the decades to follow became the Golden Age of Totalitarianism . . .

. . . and Central Banking. 

How so many Americans miss seeing the direct link between Totalitarianism's central planning and the supposedly benign central banking is beyond me. These are identical impulses—a desire to control of every aspect of national life. What could be more vital to the daily bread of any people than their money? Kings and monarchs of yesteryear could only dream of having the power to create money out of thin air—they had to extract it from the earth, or their people's purses via taxes, or borrow it from somebody (usually a Jew, whom they would then resent and ostracize). But I digress.

The Great Depression demonstrated the impotence of America's central bank to end financial panics—the very rationale used to establish it. So when a government's plan fails miserably, do they abandon it and go back to the drawing board? No, instead of ending the Fed, FDR used the man-caused disaster as a pretext to confiscate Americans' convertible gold. We still have these brutal recessions, but now the Fed inflates the money supply so politicians can spend like crazy to buy our votes. What a country!

Since the dawn of civilization, gold had been money. But FDR's motto was "bold, persistent experimentation!" He couldn't completely take America off the Gold Standard, but his arbitrary re-valuations and his Keynesian spending prepared the way for Richard Nixon's dumbest idea, which was to "float" the dollar. We now have a fiat currency, unhinged from any standard other than the collective wisdom of the Fed's dozen-odd governors.

Today, when you compare the Fed's Target Inflation Rate of 2% to the 0.84% savings rate you're getting at Ally Bank this week, every hundred dollars saved means your account only loses $1.16 each year. Of course, the Fed doesn't want you saving money, they want you to spend it. You see, banks no longer need consumer savings in order to accumulate cash to make loans—the Fed just pushes a button to squirt a few hundred billion more dollars into the banker's pockets. By the time those funds work their way through the system and into our paychecks, prices of daily necessities have gone up! It's good to be a banker with access to the Fed's discount window.  

Part of the calculation made by Statists in power is to puff up clouds of complexity—aimed at discouraging citizens from intelligent debate on monetary matters. In one sense, of course, they're right: the myriad free decisions made every minute in America between willing buyers and willing sellers (including their decisions to not spend) is far too complex to be controlled or managed. But rather than being humbled by this unimaginable web of interactions, arrogant bureaucrats and their enabling political masters seek to dominate, tame and bend the nation's economic life to their will.  Aside from the obvious threat to freedom, this overreach always fails to bring about its stated goals—leading Statists to create ever more intrusive, oppressive laws and regulations to force us to behave the way they want.

But there is a growing body of scholarship exploring options all the way from disbanding the Fed to instituting a new Gold Standard. Aside from Ron Paul's famous End the Fed, there's terrific writing from three Think Tanks you need to keep up with: the Cato Institute, the American Enterprise Institute's Values and Capitalism site, and the Ludwig Von Mises Institute.