I’ve heard a lot of talk on why we should end the Federal Reserve. Could someone outline the basic reasons why?
It’s an institution devoted to the central planning of the economy, and I suppose you at least heard about the impossibility of efficient central planning.
To add a question:
I understand why we want to end the Federal Reserve, but what is supposed to be the point of auditing it? Just to see exacting where the money (knowingly and unknowingly to citizens) is going?
Because it is an organization with a monopoly on legalized counterfeiting.
Hey great video. So the main problem with the FED is that it allows the government to print money?
If so, what is the solution to the FED?
It doesn’t allow the government to print money. The government allows the Fed to print money. The idea is that the government has to be more transparent than the Fed, so people want the government to be the ones to print money, as designated in the Constitution. However, the Constitution also calls for the only legal tender to be gold and silver. What would happen in an anarcho-capitalist society is that various private (not corporatised like the Fed) banks would open up and would have to compete while printing money, and their customers/shareholders would be able to easily see which banks are being responsible. They’d also have to account for their own investments, etc.
In no real order . . .
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It has way too much centralized power. Ben Bernanke was voted 4th most powerful person in the world in 2009 and 7th in 2010.
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They are enablers of risk. The Fed is solely responsible for guaranteeing companies that are “too big to fail” will not fail.
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It has shown no positive effect on growth and there is evidence that it has been quite negative. In the 96 years since it was created, Real GDP grew 2069%. In the 96 years BEFORE that, Real GDP grew 4470%.
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Over the same amount of time prices grew an estimated 2135% from 1913-2009. They went down 26% (although fluctuating over time) from 1817-1913.
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They turned the 1929 crash into the Great Depression by manipulating the money supply.
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It was passed by Woodrow Wilson.
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It was passed 2 days before Christmas when 27 Senators were not present. Only 43 voted for it.
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It has the power to issue legal tender and answers only to the Federal Governmet. Therefore: when they need money, they get it. In 1913, Federal spending was 2.48% of GDP, Federal revenue was 2.46% of GDP, and Federal debt was 7.46% of GDP. At the end of 2010, Federal spending will have been 25.44% of GDP, Federal revenue will have been 14.81% of GDP, and Federal debt will have been 94.27% of GDP. It is estimated that by 2015 the interest on the debt will cost $1,772 per capita. That’s over $7,000 a year per family of four.
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Because the Fed allows the government to grow so much, all of the problems caused by a large Federal government arise because of it as well. World War I, World War II, the Korean War, the Vietnam War, the Gulf War, and the wars in the Middle East were all made easier because of the Fed. Tens of millions of Americans have died because of this.
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As the government slowly grows bigger, people are more likely to accept it as the norm and give up their freedom a little bit at a time, hoping that a “big brother” or “nanny” state will be able to protect them. If Benjamin Franklin was right when he said “Any society that would give up a little liberty to gain a little security will deserve neither and lose both.”, we are certainly living in that society today.
Good post. What’s your source for the stats on inflation and GDP growth?
I won’t spend all day on this, and the other posts cover it well, but the short answer is this:
Because they print counterfeit money, then charge everyone interest on it.
The central bank cartelizes the entire banking sector into essentially a single bank that is not bound by the profit/loss constraint and which does not engage in rational economic calculation. The mechanisms that exist in a free competitive banking system, that prevent continuous monetary expansion, and which measure the demand for money, are arbitrarily removed. They are replaced by ad hoc decrees, based on extremely crude and imprecise measures (such as inflation targeting, interest rate targeting, unemployment measures, etc). Additionally, it creates a moral hazard because it implicitly guarantees support and even bails out struggling and/or failing banks (its function as the lender of last resort).
Simply put, the central bank allows commercial banks to increase the supply of loans beyond the demand for credit, with money that was arbitrarily created ex nihilo. This, in turn, increases the total supply of money beyond the demand for money and leads to inflation (relative price inflation and/or general price inflation), altered preferences, and malinvestments (all three are interrelated).
Austrian’s don’t oppose the central bank because they believe it was created by evil, demonic, Jewish bankers. Austrian’s claim that even if the central bank was introduced and operated by saints, it would still be a destructive institution.
End the FED - why?
Why not?
Oh, and what Esuric said.
I would have to say that #6 was my favorite reason even though all the others were intellectually more sound.
In short,
The Federal Reserve is a government monopoly. The reasons to oppose central banking are essentially the same as those for opposing other forms of central planning.
Because you want to stick it up to the man.
Let the FED do whatever it wants.
End the government.
Resist2727…, can you post links to your stats? I’m writing a paper about central banking and that would be extremely helpful.
MeasuringWorth.com. It’s pretty sweet.
Wow, that site is awesome. I got so much information from it. It is really difficult to find economic data from the 19th century. By the way, if anyone is interested here is an index of consumer prices that goes back to 1700: http://webcache.googleusercontent.com/search?q=cache:aFgpZx2mbeYJ:qrc.depaul.edu/Excel_Files/Prices/McCusker.xls+john+mccuscker+cpi&cd=2&hl=en&ct=clnk&gl=us