Greetings. I am new to the Austrian school of thought . Due to mostly independent study I have found the Austrian theory the one that makes the most sense and I really love the unique praxeological approach to economic matters.
Anyway, I was debating with a friend of mine and he insists that the Fed is actually a capitalist institution. After a laugh , I proceeded to explain to him that the Fed has nothing to do with Free Market Capitalism since it is a State enforced monopoly on the money itself. There can be no legal competition for the Fed. He distinguishes capitalism and free enterprise and insists that the Fed is capitalist because capital is man made and can be reproduced. In the Fed’s case this would be paper. I naturally still think hes full of poo but I was wondering how some of you would react to those kinds of allegations.
Well, first explain to him that the basis for capitalism is property rights. Then explain that the Fed takes away property rights by possessing the power to dilute the value of your dollar by inflating the money supply. Also, you should point out all the anti-capitalistic regulations on banking the Federal Reserve Act puts, and how the government basically gives the Federal Reserve a monopoly on producing money. Showing him the central bank plank of the Communist Manifesto wouldn’t hurt either.
What a stupid non sequitur (referring to the OP.) Capital consists of all those higher order goods fixed in the production of lower order goods. Money is merely an intermediary, a medium of exchange, used to acquire those higher order goods. It is not capital, in any sense of the word. What can sensibly be said to characterize a capitalist society is the division of capital and labour, but even this is contentious.
Thanks guys, I knew I would get veritable and solid answers from the forum Austrians. Yes, the fact that the Fed itself has a monopoly on the currency is the bases of my argument. Furthermore, the monopoly is enforced through government coercion.
He brought up another fatous argument claiming that gold lost to paper. In the general setting of free market competition, gold lost to paper. Again I had to laugh and it returned me to my cheif point. Gold was subverted by government forces and those same government forces commanded people to use paper as legal tender so there was no real competition. He seems to deny the fact that in the past different commodities have competed as a medium of indirect exchange and the market ultimatly chose gold because of its unique and desirable properties.
He seems to be a monetarist and uses the same old quantity theory of money argument against gold. To him the fact that gold is scarce and cannot be replicated is a bad thing?!?! It is precisely because of that that gold standard advocates ( 100% reserve) champion gold to combat arbitrary inflation. Conversly, this is why government and the Central Bank hate gold because it puts a stop to the inflation addiction.
In addition, he seems to be a ‘utopian (or more specifically , a millenial) thinker’ type which immediatly warns me that I might be detecting a bit of Marxism or Keynesianism here. He believes capitalism is required to supply an abundence in capital but then will naturally shift into some brand of socialism. Its actually funny to me, the critics of capitalism realize that the productive potency and efficiancy of capitalism is needed to achieve their utopian aims but then can be rejected later.
Does anyone have a link to the Communist Manifesto where it advocates a central bank and is there a link to read the provisions of the Federal Reserve Act ?
Yes, it’s incredible how imbeciles often think you can have capitalism for the production of wealth and socialism for the distribution thereof, as if this system would function for very long.
That’s roughly what the Chinese are attempting at the moment with their Special Economic Zones isn’t it? It seems to be working out well for their leaders so far - we’ll see in the long run though.
?