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Many would argue that the Federal Reserve is the mainstay of the American economy—that without a Federal Reserve, the nation’s finances would spin out of control and create massive global instability. Supporters of the Federal Reserve system believe prosperity requires prices to be altered by congressionally authorized monopoly—enforced by the Legal Tender law.
U.S. Founding Father Thomas Paine on legal tender:
As to paper money, in any light it can be viewed, it is at best a bubble.
If anything had or could have a value equal to gold and silver, it would require no tender law.
…and if it [paper money] had not that value it ought not to have such a law; and, therefore, all tender laws are tyrannical and unjust and calculated to support fraud and oppression…
By definition, the Fed is "the bank of the U.S. Government and regulates the nation’s financial institutions. It’s comprised of a network of 12 Federal Reserve Banks and a number of branches…This is all overseen by the Fed’s Board of Governors.”
Unintended Consequences of Price Fixing
So a small group of men will arrange prices rather than global markets “voting”?
The Fed’s purpose is "to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates.”
Well we know how the “purchasing power” part worked out.
But “moderate … rates”?
Fixing prices has never worked. How many interesting side effects come about when fixing prices?
Retirees are responding to the lack of income on earned savings by remaining in the work force, the only age category (55+) to gain jobs (6 million) since the crisis began.
6% Dividend For Owners
This “centralized banking system” established by President Woodrow Wilson is a rather unique structure; it is“not a branch of the federal government. It is not even a federal agency. It is a private entity owned by the member banks.” They are stock holders, and they “shall be entitled to receive an annual dividend of 6%...”
That 6% is a better return than most can get; even lending to those whose credit is rated “junk”(high-yield bonds) famously now pays less than 5%.
Economic Condition
Since the Fed has more control over the U.S. economy than any other institution, economic conditions are a direct result of its persistent intervention and of Congress’ authorization of this price fixing.
Some financial analysts maintain that instead of serving its original purpose, the Fed has actually created more instability and made inflation a “normal” pattern in the U.S. economy.
Since the inception of the Fed, consumer purchasing power has actually shrunk over the past 100 years; median earning male workers "actually have less real purchasing power than they did 42 years ago ($32,844 then vs. $32,137 today).”
Over time, the entire system is bound to collapse. As one author states, “Just ask anyone in the former Soviet Union…the state eventually took so much wealth from the people that the entire system broke.”
As an independent entity, other privileges that the Fed enjoys are as follows:
· It has no budget from congress, as it they allowed it to form as a privately held business.
· Its activities are not subject to audit—many operations remain private.
· No congressional committee can truly supervise its operation—the Fed refuses this oversight.
· The officers of the 12 regional Federal Reserve Banks are selected from among their own membership.
· The bank that handles (and profits from) all U.S. national transactions and deposits
· The Federal Reserve enjoys a monopoly, authorized by congress.
The Fed’s secretive nature has made many financial forecasters wary of the institution. Its ability to regulate the ebb and flow of the nation’s finances with a relatively free hand has caused many to question its practices.
Fed Chairman Ben Bernanke’s procedure of excessive printing over the past few years, for example, has helped create a booming stock market but has done little to create any job security or purchasing power for the average American on the street.
Bernanke’s “quantitative easing” activity is actually eviscerating the value of the U.S. dollar, and what he’s doing "is artificially taxing the American public by debasing its currency.”
Moral Hazard
One central argument against the need for a Federal Reserve stems from the fact that “success by its very definition includes failure. People forget that the discipline of failure is integral to capitalism…When the Fed prints… the risk of failure does not exist.”
Without this risk, big banks don’t worry about losses because they are literally “too big to fail.”
Dissolving the Federal Reserve would actually help create more economic stability by:
1. Allowing market forces to ensure the national government lives within its means.
2. Restoring price signals to the global community (real price discovery).
3. Nullifying the existing risk that the public will be forced to pay to keep irresponsible bankers working in the event of bank failures.
The U.S. needs to get its “fiscal house” in order, and it is becoming increasingly evident that this perpetual charter of the Federal Reserve Bank is an obstacle to that goal (How to End The Fed, And How Not To). The next big waves of U.S. debt will fund centralized healthcare and infrastructure spending.
The Federal Reserve is a “dinosaur” whose time has passed, and continuing to support the Fed’s activities is as unwise as it is unsustainable. Like the prehistoric monster Godzilla rising from the sea, it wreaks destruction and terror in its path. The time has come to return to an economy in which the public naturally chartsits own destiny.
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