Enough is enough. I have been hearing so much lately from people about the Federal Reserve and downplaying it so much lately that it isn’t even funny. Let’s get one thing clear: it is NOT this inseparable entity that we simply can’t do without, otherwise our economy would have never seen the light of day to begin with. In this article, I’m taking off the “kiddie gloves” so to speak. I will be making the Economic and Constitutional case against the Federal Reserve and its unlawful practices.

ECONOMIC:
Let us go back in time to America’s first ever economic crisis: the Panic of 1819. There were quite a few factors to play into this, but I’ll focus on two for the purpose of this article: mass suspension of banking payments and the first major attempt to manipulate the currency. The mass suspension of banking payments started back in the War of 1812 between the US and the British Empire. At first glance, this would seem like a case FOR a Central Banking system with these so-called renegade banks, but there is a hitch. If you think back to the time, all of the major funding banks to the US at the time were located around the British region or under some kind of British control. As a result, this gave the British Empire the opportunity to sanction the banks in a way that crippled US funding for the war, but the damage was so much more extensive. Hence, the “Panics” of the 19th century.

Furthermore, the US tried to correct the issue of economic turmoil, which led to their first attempt to manipulate currency in a way to create credit and meet financial quotas for the government. This only resulted in the acceleration of the impending Panic of 1819. As funny as it sounds, the Panic actually served a beneficial purpose: it set the monetary system and the economy back into order, even if it meant time for it to recover. Following the Panic, a new economic precedent seemed to develop from the experience of the Panic: for each artificial “boom,” there will be a real bust to follow.

Now let us fast-forward to 1930, when the Great Depression bore its roots into the core of the US economy. Furthermore, a common misconception came about after the Depression that market economies needed government assistance in order to be preserved and protected from occurrences such as the business cycle. Ivan Pongracic Jr. writes in his article:

The Great Depression created a widespread misconception that market economies are inherently unstable and must be managed by the government to avoid large macreconomic fluctuations, that is, business cycles. This view persists to this day despite the more than 40 years since Milton Friedman and Anna Jacobson Schwartz showed convincingly that the Federal Reserve’s monetary policies were largely to blame for the severity of the Great Depression. In 2002 Ben Bernanke (then a Federal Reserve governor, today the chairman of the Board of Governors) made this startling admission in a speech given in honor of Friedman’s 90th birthday: “I would like to say to Milton and Anna: Regarding the Great Depression, you’re right. We did it. We’re very sorry.”

From this excerpt of the article, Milton Friedman’s attempt to illustrate the failure of the Federal Reserve banking system would be one of many to go unnoticed by the proponents of the Fed. From the apology of the current Federal Reserve Chairman, Ben Bernanke, we can indicate an acknowledgement from the Fed of its own failed policies, yet they are still happening today in different forms. Fact of the matter is that the credit expansion policies of the Fed created a temporary boom throughout the 1920s which ultimately led to a real bust and crash of the stock market. The conclusion to be drawn from here is that credit creation “out of thin air” distorts price mechanisms and other markets within the market system, damaging the market in the long run.

To further my point on the illusions of prosperity that the Federal Reserve creates with its banking practices, let us look back at the Housing Market Bubble in 2008. The Fed essentially played the role of price controls in an effort to make housing more affordable and desirable to individuals in the market place, which set the stage for an impending bubble. As people bought into the market with prices artificially reduced below market prices, the market continued to distort and the bubble expanded. By the time it had peaked, however, it began to deflate and prices began to surge. People found that they could no longer afford to live in houses they were once able to pay for. The market fell through and the only ones to benefit were the big investors who were well informed of the market failure in advance. Ultimately, the rich investors and bankers prospered while the middle and lower class individuals suffered.

The Federal Reserve has invoked policies that are both credit expansionary and inflationary. Inflation, to put it in short, is nothing more than a hidden tax imposed on tax payers that pay more for goods and services than the normal market price intends. This is because of the depreciation of the currency that we use in purchasing these things and price increases offset the cost of the weakened currency, ultimately punishing the consumer in the market.

With the Economic case presented, it is safe to say that the Federal Reserve has done more damage to our economic system than it has good. The Federal Reserve isn’t this entity that we just HAVE to have, especially when we could find a better alternative to our fiat currency and government interventionist policies in our money.

What would the alternative be?

First we can audit the Federal Reserve and pull papers from the past 5 years to expose its involvement in unlawful activities such as the European bailout and its role in the Housing Bubble. Afterwards, legal tender and minting laws can be repealed in taking the printing power of the Fed away and the repeal of the Fed to follow. From there, the power of money management can be left back to the private minters that worked it out, legalizing competing currencies such as gold, silver, and others of value in the market. These currency alternatives are strong in value and stable for the market place. Furthermore, free market pricing mechanisms can run their course and keep prices of goods and services stable without market distortions. In the long run, the market and its consumers and producers benefit versus the failed Government-involved alternative.

CONSTITUTIONAL:
I will try to make this brief, considering my Economic case went on longer than intended (I actually had to shorten some of my original thoughts on here). In addition to the Federal Reserve’s failures in spurring economic prosperity, it is above all unconstitutional. I will quote from Article 1 Sect. 10 Clause 1 of the US Constitution:

 No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Let us take a look at part of this: “not making any Thing but gold and silver Coin a Tender in Payment of Debts.” From this we can easily see that Gold and Silver were the intended legal tender to begin with. The Founders like Thomas Jefferson understood that importance of avoiding fiat currency because of its historical failure to other economic institutions that have suffered in the past from currency manipulation. For example, the Byzantine Empire, from Constantine onward, ran on a gold standard for 600 years with real prosperity accompanying it until the government manipulated it when going to war. Then they collapsed into economic despair.

Furthermore, if you look at the powers of Congress in Article 1 Section 8, there is no mention of a power, implied or not, of the Congress to construct a central banking system with minimal oversight.

Therefore, the Federal Reserve is unconstitutional, nor is it necessary.

CONCLUSION:
I have covered the case against the Federal Reserve on the grounds of the failure of its over-reaching monetary policies in the market and its unconstitutionality.

We really need to re-consider monetary policy in America, in terms of whose truly responsible of managing it and replacing the fiat dollar with a commodity-based currency that is truly worth the market value (gold, silver). Money is the back bone of any economic system and if we stay the course of fiat currency, then we will be consumed further in debt and fall into another Great Depression of our own. With currencies like Gold and silver, because they aren’t as flexible as the fiat dollar, would discourage deficit spending from the government and even spur fiscal discipline. I could elaborate on this point later on though as to why the gold and silver currencies spur fiscal discipline in government.

If we are to truly have a free and prosperous market system, money must be taken out of the hands of the banking cartel. Otherwise, we will suffer the consequences. That being said, we need to End the Fed!

-Nathan

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