Forum Posting

In response to The Central Bank as Responsible Guardian, hercules mulligan writes:

Interesting post.

I happen to be one of those folks that vehemently opposes the Federal Reserve System, simply because its very name is representative of the crock that it really is: it is not federal, there are no reserves, and (unless its directors are lying, which I believe), it is a very poor system at accomplishing its stated objective: to keep the money supply steady.

I do not oppose the FRS because I believe that the govt. should issue money; I oppose the FRS because a privately-owned central bank is a step WORSE. The Founders did not believe that the govt. should issue money, because they saw the devastating effects of that when the Continental Congress issued money during the Revolution. the Continental Army starved! Inflation skyrocketed! The country went bankrupt! No one could afford a thing!

However, at least the people can choose good representatives who won't do that (though, as you pointed out, this is a rare occurance). But why should we resort to a system that puts our money (and hence, ourselves) into subjection to people we have NO control over? In the case of the FRS, it is the product of a conspiracy between corrupt Congressman and FOREIGN banking dynasties (the Warburgs and Rothschilds, for instance). To learn the details, I would recommend Aaron Russo's documentary "America: Freedom to Fascism" (see www.freedomtofascism.com)and G. E. Griffin's book "The Creature from Jekyll Island." Both are heavily based upon good documentation and sound reasoning and morality.

As to the First Bank ... in political matters, I think that Hamilton was right most of the time, but I am not convinced that the Bank was a good idea (even his son later on opposed the renewal of its charter and the establishment of a Second Bank). I just can't be convinced that a privately-owned central bank that operates on the fractional-reserve principle (loaning more money that you have so that money becomes mere bookkeeping), and which borrows immense amounts of gold from foreigners is a good idea.

Rob Scot responds:

Thanks for the comment.

Though I have not read Griffin's book, I am familiar with its premise and basic claims. I do not think I can reasonably argue against the record that the Fed was brought about in large part by back room dealing and self-serving bankers (although I believe the foreign influence and its threat to be over-rated). However, I nonetheless maintain that the Fed has, by in large, served the economy well. Though, admittedly, its directors profit from its existence, they are dependent upon a strong economy for their well being.

And, as I stated, I do not feel that the economics of a nation can be left to elected officials (who, of necessity, must be more jacks-of-all-trades than specialists). Still, your misgivings at the power placed in the hands of men not beholden to the will of the people is understandable. I believe I can say, as you no doubt believe, that there is a better alternative, though I am not convinced that government control of the economy is a step in the right direction. Perhaps greater government oversight of private control would constitute a better system (as opposed to the current government approval of Fed directors, which is quite obviously a wash); yet having no distinct vision in mind of what such a system would look like, I must say that, for now at least, the status quo should be maintained.

As to fractional-reserve banking, I also must confess misgivings as to its wisdom; it is by no means a prudent system. But I also believe that its ability to expand an economy has been in large part responsible for the ascendency of Western capitalism over the past four centuries and the international influence that the U.S. and Europe now enjoy.