Donald Trump led a gut-level attack on the Establishment.Listening to a Trump speech you didn’t learn economics or the philosophy of liberty; you only heard what you already knew: you were getting the shaft from the elites.
Ron Paul understands liberty and how it relates to economics, especially monetary theory, and attempted to educate Americans on some important points. Although his approach had strong appeal to young people it didn’t wake up enough older Americans to create a major movement.
And that was our loss. Is it too late? Maybe not.
Main Street people don’t understand the Federal Reserve. They sometimes confuse it with the Treasury if they think about it at all. They have no idea what the Fed really does, other than adjust interest rates somehow. To them the Fed is a big black box, but evidently an important one. The FOMC gets together every so often and issues statements that are meaningful to a handful of people. It is Greek to the rest.
This is one way the Fed protects itself. If it were widely seen as a monopoly counterfeiter the legitimacy of government would collapse.
You don’t get big government without a means of funding it, and if you need money — lots of it — and have already raised taxes to their political limit, the government solution is to print it into existence. Think of a child playing make-believe.
Long ago government counterfeiting often meant debasing the monetary gold or silver by mixing it with less valuable metals, but the citizens who were forced to use it could easily tell a fake from the real thing. They would hoard the latter and use them on the black market.
With the invention of paper money the defense against bad money disappeared. One bill looked the same as the next. As the long as the paper was a substitute for a weight of gold or silver, though, people could always attempt to claim the coins the paper represented. Fractional reserve banking made this impossible for every note holder and caused crises when depositors showed up asking for their gold, which the banks didn’t have.
Bankers were not inclined to throw away a profitable practice like fractional reserve banking, even though it amounted to embezzlement. The solution was a central bank, but Americans were distrustful of centralized institutions.
In the U.S. big bankers got together and devised a central bank so named as to appear not to be a central bank: The Federal Reserve System. It became law in 1913, along with the income tax amendment to the Constitution.
But there was still a problem: Every dollar still had to be redeemable in gold coin.
Inflationary monetary policy became one of the twin fiscal engines driving pathological government expansion, the other being withholding.
Does Donald Trump understand any of this? Does he care if he does? Is he motivated to find out if he doesn’t?
As a model of how to proceed they pointed to the Depression of 1921 and to the hands-off approach during the 19th century.
And as a way of avoiding the business cycle altogether, they recommended removing the cause: Repeal of the Federal Reserve Act of 1913 and all legal tender laws.
This may be too much for any president, even a maverick like Donald Trump. But he could take the first step by removing the Fed’s note-issuing monopoly. Allow competition in money. And may the best money win.
