"The neighborhood crowd that shouts for something better"
Based on a talk given outside the Federal Reserve Bank of San Francisco, on November 22, 2008, during the first national End the Fed Rally, the grassroots protest at every Fed office and bank in 39 cities all over the United States.
Last month, Alan Greenspan told a House panel that the current financial crisis has shown he had "made a mistake" in trusting the free market to regulate itself. As a true free marketer, I took offense at this. Here he was, the former head of the Federal Reserve, the governmental monopoly of the money supply, implying that what he had championed was free-market capitalism.
Of course, a true free market would mean a separation of money and state. There would be no Fed, no central bank, no legal tender laws. Private currencies would be free to compete with one another. Money originally emerged as a market mechanism and it could and would again be completely managed without government intervention of any kind. What most of us here would expect to happen is to see gold and other precious metals once again take the role as the premier money in our economy.
This all brings us to the major myth behind the Fed: That it is the center of our free enterprise system. In fact, it is the exact reverse. It is the state’s tool for socializing and intervening in the most crucial of all commodities in an exchange economy – money itself. Going back to the Hamiltonians who always wanted a national bank to fund their pet corporate welfare projects, the central bankers and their advocates have always been the great enemy of free markets in America.
This ties into another persistent myth, one that forms a paradox with the free-enterprise myth and one just as important in muddling the debate and public understanding over this issue. That myth is the lie that unregulated banking was dysfunctional and predatory until the Federal Reserve reined in the big banks all for the sake of the little guy.
If the free-enterprise myth is the thesis of monetary propaganda, and the progressive myth is its antithesis, they both serve together to form the synthesis of all of us being ripped off and very few understanding what is happening. In reality, the Fed is the worst of both worlds: Privatized profits and socialized risk: It is the key to corporate socialism and the corporate state: It is the intersection of the wealthiest private interests with the brutal power and monopoly that only the government can offer: It is economic fascism in our midst.
Indeed, the Fed was signed into law by Woodrow Wilson at the height of the Progressive Era, and soon enabled the U.S. government to become a global empire, especially with its horrific entry into World War I. The central bank was admittedly sold to the public as a way to protect the people from greedy bankers. But we all know that when representatives from banking giants J.P. Morgan, the First National Bank of New York, the National City Bank of New York, and Kuhn, Loeb & Company met at Jekyll Island in 1910 to plan the creation of the Federal Reserve, their interest was not to curb their own power and wealth.
It is a lasting irony that the key triumph of progressive economic planning was the Fed, for the Fed provides the most regressive form of taxation in our society. The new money and credit coming from the Fed do not become distributed evenly among the general population. It all goes to the central bankers, the government itself, the politically connected corporate interests, the military-industrial complex, and favored firms on Wall Street. Meanwhile, the value of the dollar declines. It is wholesale robbery from the poor, the middle class, and those on fixed incomes, all to benefit the most politically and financially powerful elite in American society.
The last great myth behind the Fed is that it leads to stability. Well, for the power elite, perhaps, but not for the country or international economy as a whole. At the center of this myth is the idea that the Fed keeps inflation in check, which is like saying the Pentagon wages peace. In fact, the Fed’s operations are inflation. That’s what it does. It has caused prices to increases virtually every year since 1913, simply by increasing the money supply.
Then there is the idea that the Fed keeps the booms and busts in line. This is another total reversal of the truth. In a normal market setting, savings and inflation would be in harmony. The willingness of some to save and the demand of others for credit would work out to an equilibrium and produce the market interest rate. The Fed’s injection of new money into the system undoes this delicate balance. People get cheap credit and invest wildly in projects for the future, but those low rates no longer correspond to high savings. The consumers are still spending like crazy, the investors are investing like mad. This is what causes booms and eventually busts. When years later, people have not saved up enough to purchase all the products being produced through long-term investment projects, we have the bust. The Austrian Theory of the Business Cycle and sound economics help to explain the 1929 crash, 1970s stagflation after the guns and butter of the 1960s, the dot-com and real estate bubbles and all the other problems since 1913 that Keynesian economics doesn’t account for sufficiently. I suggest to everyone they read Murray Rothbard.
Very recently, we’ve seen the Fed behave even more criminally than normal. Its operations are intrinsically fraudulent, but it has become even more brazen. It has reached for new powers to become more directly involved in financial central planning. During the Billionaire Bailout deliberations, the Fed was injecting hundreds of billions into the economy even without Congress or the president or anyone else having a word to say about it. In the last couple months alone we’ve seen a 40% increase in the monetary base. Right now we are not feeling inflation and are thankfully having some deflation, the one welcome part of recession, but within a year or so we can expect very significant inflation. Prices will go back up. And as in the 1970s, we might have the worst of both worlds as unemployment rises along with inflation. Predictions are always tricky but we are probably in for a wild ride, and of course Obama and his team of establishment crooks will not do anything to reverse this.
Everything the Fed does is based on a foundation of lies. It does not represent the free market. It does not curb corporate greed for the benefit of the little guy. It does not stabilize prices or the economy in general. It does not prevent inflation or the boom and bust cycle. Everything the establishment, both political parties, the mainstream media and the government have said about the Fed is the opposite of the truth.
It is great to see this grassroots movement, all around the country, all united against our common enemy, the central bank. We don’t all agree on everything, we come from different political viewpoints, but we do share a very vital common interest on this neglected issue.
If you really believe in true free enterprise and oppose seeing it destroyed in its own name,
If you hate seeing the poor and middle class squeezed dry to benefit the privileged elite,
If you want an economy of openness, fairness, and honest balance sheets,
If you are sick of seeing the people responsible for our booms and busts claim they know the answer, when their only solution is more of the same,
If you oppose profligate spending and reckless social engineering from Washington, DC, without any consideration of fiscal discipline,
If you oppose the government’s perpetual wars and empire, which is funded through inflation so as not to stir up resentment through high direct taxes,
Then we do have common cause. Fight the power. End the Fed.
November 25, 2008
Anthony Gregory [send him mail] is a writer and musician who lives in Berkeley, California. He is a research analyst at the Independent Institute. See his webpage for more articles and personal information.
Copyright © 2008 LewRockwell.com
John P. Curran
Mon, 01 Nov 1999