The Federal Reserve system needs to be abolished, placed on the scrapheap of financial/economic history. I realize this is a radical, you might even say a fringe, idea. But, if you think about it, it is no more an extreme idea today than the abolition of slavery was in the 1840s and equal rights were for black Americans in the 1950s. Slavery was eventually abolished, and equal rights were given, because they were the right things to do. When Americans realize the Federal Reserve in the 20th and early 21st centuries has enslaved them to a monetary system that benefits the political elite and favored rich at the expense of themselves, they should do the right thing and force Congress to eradicate the system.
The framework for our current Federal Reserve system was hatched at a secret meeting of bankers at Jekyll Island, Georgia in November 1913. Orchestrated by JP Morgan, the goal of the system was to provide the nation with a “safer, more flexible, and more stable monetary and financial system.” But, as will soon be pointed out, the Fed has never accomplished its mandate. In fact, it has been used more as a vehicle by politicians to spend recklessly so they can get reelected and as a business plan for big banks to make a fortune.
As to the first accusation against politicians, it’s no secret that the federal government is broke. Indeed, Washington owes a little over $11.6 trillion, not including about $45 trillion in unfunded future liabilities for Social Security and Medicare. Since September 28 2007, the national debt has increased by about $4 billion a day. So how is it that Washington can continue to spend us into oblivion on such ridiculous programs as Cash for Clunkers? In a sweetheart arrangement, the Fed monetizes the government’s debt by printing money and purchasing a bond (debt instrument) from Congress. It then attempts to sell that bond to individuals, banks, countries, and other institutions as an investment. Uncle Sam then must pay interest on that investment. One can immediately realize a big problem: increasing debt means higher interest payments, and higher interest payments mean a larger percentage of the federal budget must be used just to service the debt.
Article comments
1 - Franco
Edward,
Everything you have outlined in broad strokes is mostly true.
So for the sake of your argument lets suppose all greedy and or selfish politicians saw the light and agreed with you. How dose one weenie our system off the Fed? What are the steps and the effects in moving to this end? Have you given this any thought?
2 - Kenn Jacobine
I think a start is by informing all Americans about the Fed and its practices. H.R.1207 Federal Reserve Transparency Act of 2009 is a start in the weening process. Then, there has to be a transition period between fiat money and a commodity backed dollar. Perhaps the Fed is abolished and Congress reassumes it constitutional right to print and coin money. Then a commission is assembled to fix the rate (gold weight per dollar and the guidelines of the system). It won't happen overnight and I think reform of other systems is futile given the need for sound money to contain costs.
3 - Bliffle
I think it's too late: too much inertia.
Anyhow, commodity-backed currency is a loser. It doesn't work, and eventually it is overthrown by politicians.