End the Fed, before it ends U.S.

The Fed’s counterfeiting causes the price of goods and services to rise. Since its inception, the U.S. Federal Reserve’s monetary policies have led to a decline of over 98% in the purchasing power of the U.S. dollar.

Economic Storm Clouds Gather, but Ending the Fed Provides Hope

Eventually the combination of a spendthrift Congress and a print-happy central bank will cause a major economic crisis

The Federal Reserve recently increased interest rates to 1.75 percent. This is the highest interest rates have been since 2008, but it still leaves rates at historic lows. While the Fed says economic growth justifies future rate increases, an honest examination of the economy suggests that future rate increases are unlikely.

The Fed’s claim that the economy is strong is based on misleading government statistics. For example, the official unemployment rate understates true unemployment by not counting those who have given up looking for work. According to John Williams of Shadow Government Statistics, the real unemployment rate is above 20 percent. Government figures also understate the rate of inflation by pretending that you are not negatively impacted by inflation if you can still buy hamburger when you cannot afford steak. Shadow Stats estimates that the real rate of inflation is as much as four times higher than the official rate.

President Trump’s tariffs will further weaken the economy. While export-driven industries, including manufacturers that rely on imported materials, will be particularly hard-hit, the tariffs combined with the inevitable retaliation from other counties will impact all sectors of the economy. A global trade war could also lead other countries to stop buying US debt instruments, increasing pressure on the Fed to keep rates low.

Since Republicans have held control of the White House and Congress over the last year, federal spending has increased 12.9 percent. Clearly those in Congress serious about reducing government spending are few and far between. The sad fact is that both major parties are happy to increase welfare and warfare spending, although many Republicans pretend to oppose deficits when a Democrat sits in the White House. This puts tremendous pressure on the Fed to keep rates low so as not to increase the federal government’s already high interest payments.

This cannot last forever. Eventually the combination of a spendthrift Congress and a print-happy central bank will cause a major economic crisis. This crisis will herald the end of the welfare-warfare state and the fiat money system that sustains it. The only question is whether the existing system will be replaced by a free market and limited constitutional government or we will complete our descent into totalitarianism.

Fortunately, more Americans are becoming aware of the freedom philosophy and demanding that government roll back the welfare-warfare state and rein in the Fed. Many are also demanding protection of their right to opt out — not just from government programs like Obamacare but also from the Federal Reserve System. For example, Wyoming recently joined Arizona in passing a law recognizing gold and silver as legal tender. Citizens of these states are now able to protect themselves from the coming dollar crisis by using what has historically been considered real money.

At the federal level, the movement to audit the Fed remains strong. As the failures of Keynesianism become more apparent, the movement to audit and end the Fed will grow in size and strength. Hopefully this movement will ensure the end of the welfare-warfare state and the fiat currency system as well as lead to a new era of liberty.

This article first appeared at RonPaulInstitute.org.

WHAT IS THE FED?

The Federal Reserve, “the Fed”, is the central bank of the United States of America that was created in 1913 by Congress. It is a banking cartel that has a government-granted monopoly on the creation of money and credit. The Fed literally loans “money” (Federal Reserve Notes) into existence. Federal Reserve Notes are paper promises backed by nothing of intrinsic value and they are only functioning as money because the government forces them on the public through legal tender laws. Federal Reserve Notes are referred to as dollars but are not. The definition of a dollar is a weight of silver (371 grains). To put it simply, the Fed is a group of banks running a national counterfeiting operation with the protection of the government. WHY SHOULD I CARE? Because you’re being systematically robbed and enslaved. The Fed’s counterfeiting causes the price of goods and services to rise which requires you to work harder in order to purchase them. Even with all the technological advances over the last century, you have to work just as hard or even harder to survive. The Fed is siphoning off the productivity that should have come from those technological advances. The reality is that you are working overtime solely for the benefit of some bankers who the government gave the power to conjure money out of nothing. In addition, the Fed’s counterfeiting finances the tools of the government’s oppression over you: the militarization of the police, the surveillance apparatus, and the endless wars. If you cherish truth, freedom, justice, and want to leave behind a better world for your loved ones then you must…END THE FED! A free market, where each individual has the freedom to choose what form of money to use rather than one being forced on them, must be allowed to function in its place… More @ End The Fed Top 10 Reasons to End the Federal Reserve 1. The Federal Reserve Has Far Too Much Power to Control Our Economy Federal Reserve Chairman Ben Bernanke has the power to dramatically impact our economy at a drop of the hat. The central bank completely controls and determines the money supply. It is permitted to create as much money as it wants out of thin air with no restrictions. This is the antithetical to the principles that America was founded on. Our Founding Fathers would be outraged that one centralized institution has unchecked and unprecedented power to control the economy and thus our lives. 2. The Federal Reserve Has Significantly Devalued Our Currency The laws of supply and demand apply to money. The more dollars we have in the circulation, the less the currency is worth. Our money supply has rapidly increased over the past century due to the Federal Reserve printing massive amounts of money like there is no tomorrow. This is what will almost inevitably happen when a quasi-governmental entity can simply print more money to its heart’s content. Since the Federal Reserve came into existence in 1913, the dollar has lost over 98 percent of its value. Today’s dollar is worth less than a nickel compared to the pre-1913 dollar. 3. The Federal Reserve Hurts the Poor and Middle Class the Most Our hard-earned money is essentially stolen through a hidden inflation tax. Inflation is the increase in the supply of money and credit. It is often wrongly defined as the general rise in the price of goods and services. But higher prices are actually a direct consequence of inflation since increasing the supply of money decreases the purchasing power of the dollar. Inflation hurts the poor most since they have less disposable income. Consumers with low disposable incomes will be negatively impacted by higher prices for food and clothing. 4. The Federal Reserve is Run By Unelected and Unaccountable Bureaucrats The Board of Governors at the Federal Reserve are not directly elected by the American people. This means that those who run the Federal Reserve are unaccountable to the people. The seven members of the Board ultimately decide the price or purchasing power of our money. That kind of central planning would never exist in a true free market economy. 5. The Federal Reserve Has Made Our Economy Less Stable The Federal Reserve has brought us endless boom-and-bust cycles. The U.S. economy was much more stable before the Federal Reserve came into existence. It bears significant responsibility for every financial crisis over the past century including the Great Depression, the stagflation of the 1970s and recent economic meltdown. The Austrian Business Cycle Theory explains why we see such wide fluctuations in the economy. The theory states that a false boom occurs when the Federal Reserve lowers interest rates below the market rate which increases the supply of money. Artificially low credit cost sends out misleading economic signals to producers. They are inclined to respond by greatly expanding their production around the same time. In retrospect, these investment decisions called malinvestments are seen as a bad allocation of resources. Malinvestments will lead to wasted capital and economic losses. The expansion of credit cannot continue permanently which means that inevitable bust will follow a false boom created by the Federal Reserve. 6. The Federal Reserve is Far Too Secretive The central bank severely lacks transparency. Throughout its 100-year history, it has always operated under a veil of secrecy. The Federal Reserve has never been fully audited by any outside source. Our elected representatives in Congress have very little oversight over the central bank. It has continually resisted any kind of congressional oversight claiming that it would endanger its “independence.” A comprehensive audit of the Federal Reserve would not harm its so-called independence. It would only expose how the Federal Reserve has been manipulating our currency behind closed doors. And Ben Bernanke surely doesn’t want that to happen. 7. The Federal Reserve Benefits Special Interests The policies of the Federal Reserve hurt the average American. It benefits the privileged few at the expense of the rest of us. The Federal Reserve erodes most Americans’ standard of living while enriching well-connected elites. The central bank serves big spending politicians, big bankers and their friends. Special interests receive access to money and credit before the harmful inflationary effects impact the entire economy. This is why high power lobbyists protect and defend the existence of the Federal Reserve. 8. The Federal Reserve is Unconstitutional The Constitution makes no mention of a central bank. While there have been historical debates on the constitutionality of a central bank, I see no justification for the argument that the Federal Reserve is constitutional. The federal government only has about thirty enumerated powers delegated to it in the Constitution. The power to create a central bank is not explicitly granted to the federal government in our founding document. Due to my strict interpretation of the Constitution, I find the Federal Reserve to clearly violate the Constitution. 9. The Federal Reserve Routinely Bails Out Big Banks The Federal Reserve acts as the lender of last resort. The Federal Reserve was ordered through a Freedom of Information Act request to release 28,000 pages of documents in March 2011. The documents exposed that one of the largest recipients of the Federal Reserve’s money was foreign banks during the 2008 economic meltdown. The top foreign banks that received money were the Brussells and Paris based Dexia SA, the Dublin based Depfa Bank Plc, the Bank of China and Arab Banking Corp., according to Campaign for Liberty. In July 2011, due to a provision under the misguided Dodd-Frank financial overhaul law, the Government Accountability Office (GAO) conducted a one-time, watered-down audit of the Federal Reserve. The GAO investigators were not allowed to view most of the Federal Reserve’s monetary policy decisions including discount window lending, open-market operations and details on its transactions with foreign governments and banks. This first ever audit of the Federal Reserve revealed $16 trillion in secret bailouts to corporations and banks around the world in less than three years. These bailouts happened without a single vote taking place in any chamber of Congress. 10. The Federal Reserve Encourages Deficit Spending The Federal Reserve is largely responsible for the out-of-control spending by Congress. The federal government can only obtain money through taxation, printing or borrowing money. Printing money has become the federal government’s preferred method. This is also the most destructive method since the federal government is able to simply print more money as needed to finance its drunken spending spree. It has become a never-ending cycle of spending and printing more money. Voters can put pressure on their representatives to halt politically unpopular tax hikes and lenders could stop loaning money to the U.S. government. But it’s fast and easy for the Federal Reserve to print more money at a whim.

Ending the Federal Reserve from the Bottom Up

Since its inception, the U.S. Federal Reserve’s monetary policies have led to a decline of over 98% in the purchasing power of the U.S. dollar. As a result, there have been several attempts to curtail or eliminate the Federal Reserve’s powers (e.g., the efforts of Rep. Louis T. McFadden in the 1930s; the efforts of Rep. Wright Patman in the 1970s; the efforts of Rep. Henry Gonzalez in the 1990s; and the efforts of Rep. Ron Paul since the 1990s). However, none have proven successful to date, due mainly to the constraints of strong political opposition at the national level. In contrast to these “top‐down” attempts at the national level, this paper proposes an alternative approach to ending the Federal Reserve’s monopoly on money: the “Constitutional Tender Act,” a bill template that can be introduced in every state legislature in the nation, returning each of them to adherence to the U.S. Constitution’s “legal tender” provisions of Article I, Section 10.

This approach would have a greater likelihood of success for a number of reasons. First, it is decentralized: rather than facing concerted political opposition at a single Federal level, it attacks the issue at the State level, where strategies and tactics can be adapted to the types and amount of political opposition they encounter. Second, it is diffused: it can be attempted in any number of States, which can cause the opposition to spread its resources much more thinly than would be necessary at the Federal level. Finally, it is legally sound: it relies on the U.S. Constitution’s negative mandate in Article I, Section 10, that “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” Therefore, in contrast to “top‐down” attempts to “end the Fed,” a “bottom‐up” approach using “constitutional tender” laws will find greater success.

Over the course of time, whenever there have been attempts to end, or even to maintain greater oversight, of the Federal Reserve, those efforts have been strongly rebuffed. On June 10, 1932, for example, the former Chairman of the U.S. House Committee on Banking and Currency, Rep. Louis T. McFadden of Pennsylvania, gave an extended speech on the Federal Reserve System, calling it “one of the most corrupt institutions the world has ever known,” that “has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government.” He called again for “an audit of the Federal Reserve Board and the Federal reserve banks,” but was ridiculed and dismissed by Rep. James G. Strong of Kansas, who stated that McFadden must have some “violent form” of a “belly ache.”

In 1975, Rep. Wright Patman of Texas introduced a bill to have the General Accounting Office audit the Federal Reserve (HR 7590). While the bill had 22 co‐ sponsors and was reported out to the House from the Committee on Banking, Currency and Housing, it was then stuck in the Rules Committee, which would not allow the bill to come to the floor for a full vote. Patman, who was convinced that the bill “did not receive a fair and impartial hearing before the Rules Committee,” filed a discharge petition (H. Res. 746) to bring it to the floor; however, his resolution received no co‐sponsors, and the bill died in committee.

In July 1991, Rep. Henry Gonzalez of Texas, the Chairman of the House Banking Committee, asked the Federal Reserve Board to submit to a congressional audit of its discount‐window lending operations, but was refused; in 1993, he again voiced his support for legislation that would audit the Federal Reserve System (as well as make its Open Market Committee meetings televised and open to the public, as well as requiring the President to appoint its twelve bank governors instead of the bankers themselves). This time, not only did Federal Reserve Chairman Alan Greenspan resist him, but President Bill Clinton, who claimed that such a move would “run the risk of undermining market confidence in the Fed”, also rebuffed him. “There is a general feeling,” Clinton insisted, “that the system is functioning well and does not need an overhaul just now.”

The latest Congressman to challenge the authority and legality of the Federal Reserve is Rep. Ron Paul of Texas, the ranking minority party member of the House Monetary Policy Subcommittee. Rep. Paul has introduced H.R. 833, “to abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, [and] to repeal the Federal Reserve Act”; however, there have been no co‐sponsors as of March 2010. On the other hand, Rep. Paul also introduced H.R. 1207, the “Federal Reserve Transparency Act,” which would give greater auditing capabilities of the Federal Reserve to the Comptroller General; this bill now has 318 co‐ sponsors, or 73% of the Members of the House (its companion bill in the Senate, S. 604, has 33 total co‐sponsors — 1/3 of that body’s Members). So with nearly three‐fourths of the U.S. House supporting a bill, under normal circumstances the bill would be brought to the floor for a standalone vote by the full House; however, the Democratic leadership has kept the bill from being voted on, although they were unable to keep its supporters from attaching it as an amendment to a larger financial reform package (H.R. 4173) which passed in December 2009. Even with that success, there is a strong push to amend the bill by stripping out the “audit the Fed” language and instead expanding the Federal Reserve’s power over banks, lending and money.

Each of these different efforts over the last 80 years — whether by McFadden, Patman, Gonzalez, Paul, or others — have had two features in common: they have all been “top‐down” anti‐Fed efforts at the national level, and they have all been thwarted by concerted political opposition at that level. Accordingly, a new tactic is needed, which could achieve the desired goal of abolishing the Federal Reserve system by attacking it from the “bottom up” — “pulling the rug out from under it,” by working to make its functions irrelevant at the State and local level. That new tactic is the passage of the Constitutional Tender Act in individual States across the country.

[Read the full article, with footnotes and citations.]