Leave the Fed Alone

September 15th, 2012   Submitted by Davi Barker

For months now I’ve been experiencing some serious cognitive dissonance. I think it actually started over a year ago while I was staying at the Occupy San Francisco encampment set up in front of the Federal Reserve. I was invited, among others, to speak about the history and function of the Fed. In 2003 Edward Griffin’s book, “The Creature from Jekyll Island” set a brush fire in my mind, and I have largely used his arguments against the Fed, specifically that the Federal Reserve is not Federal, and not a reserve. Griffin adds that the Federal Reserve System is not a system, but that distinction really only carried weight at a time when calling it a “system” obfuscated the fact that it’s a central bank. These days most people don’t mind a central bank the way they did in 1913, but hearing for the first time that the Federal Reserve is not Federal can be jarring for people, and often it gets their attention long enough to explain that it’s actually a cartel of private banks issuing a debt based fiat currency. But at Occupy San Francisco I learned that there’s a whole different way that some people look at the problem.

One group, we’ll call them “Gold Bugs,” tends to focus on the “Reserve” part of the lie, railing against the folly of fiat money, and advocating a gold backed national currency. But there’s another group, which I’ve since learned are called “Green Backers” who focus on the “Federal” part of the lie. In their view paper isn’t the problem, and gold isn’t the answer. Private profit is the problem, and nationalizing the Fed so that the issuance of fiat paper is controlled by Congress is the answer.

Now, I’ve learned enough along the way to know that “nationalize” is a dirty word, but because of Edward Griffin and all the Gold Bug talking points I’d picked up I was accustomed to arguing that the Fed being privately held was at least part of the problem. So, that contradiction bounced back and forth in my head like a tennis ball for about a year. But now, thanks to Ben Stone from Bad Quaker Dot Com I think I’ve reconciled my thinking.

Ben recently did an episode of the Bad Quaker Podcast titled “Do Libertarians Want Government to Fix Government” in which he discusses a wide variety of issues in his delightful meandering way. In it he asserts, in no uncertain terms, that the Federal Reserve is a private corporation, and libertarians have no business asking Congress to audit or abolish privately held companies. Well, that scratched my brain right where it itched.

For some reason, even though libertarians trumpet that the Fed is a private banking cartel, we’ve been treating the problem as if it was a government agency, just as we’ve advocated the abolition of the IRS, or the Department of Education or the CIA. In reality we should take the same approach we take with all corporations. We should be dissolving the public/private partnership. The problem is not profit. The problem is not bureaucracy. The problem is not even economics. The problem is aggression. The problem is the monopoly privilege granted to the Fed by the State through legal tender laws. That is why Senator Nelson Aldrich was invited to that meeting of bankers on Jekyll Island in 1910. If they’d just wanted to form a cartel they wouldn’t have needed a Senator. They needed Aldrich because they needed the color of law.

Fundamentally I don’t care if they audit the Fed. There is nothing Congress could tell me about the Federal Reserve that would convince me to support it. But now I’m thinking I don’t really care if they abolish the Fed either. Why shouldn’t Ben Bernanke print as much paper as he wants? It’s no crime to put ink to paper. Destroying the value of paper by overprinting is no more a tax than destroying the value of iPods by over manufacturing would be. But we wouldn’t demand a congressional audit of Apple. The same economics applies. The Federal Reserve’s product is dollars. What business is it of Congress how much product a private company produces, or what they sell it for, or who they lend it to?

The act of aggression in the Federal Reserve System is not the printing of money, or the inflation of prices. It’s the enforcement of legal tender laws, and the stifling of competition by the State. It’s the fact that the State demands taxes in dollars, so even if the counter economy had sufficient labor, commodity and capital to sustain without transacting in the dollar economy the Feds would still come after us demanding dollars. It’s the fact that the State goes after almost every viable alternative currency whether it’s the Liberty Dollar or the Gold Dinar and finds some pretense to shut them down. Without this aggression from the State the value of paper would be subject to natural market forces and the Federal Reserve would be little more than a novelty certificate printing company.

So, I’m going to keep wearing my End the Fed t-shirt, and so should you if you’ve got one. But when people ask me what it means I’m not going to go into a long rant about the history and function of the Federal Reserve. I’m going to tell them what I really want deep down. I want to abolish the Federal Government.

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27 Responses to “Leave the Fed Alone”

  1. helioNo Gravatar says:

    I want the fed to stick around to stoke the economic fires of destruction. I dont want it gone until it burns down evey last straw of governmental legitimacy that people have.

    We wont have green shoots till the tangled, rotten, deadwood of the state has charred to a crisp and released the vital nutrient of liberty back into the soil of civilization.

    • DaviNo Gravatar says:

      That’s an eloquently made point. I don’t want a more efficient government. I want government to be pure and true to it’s essence. To wish otherwise is only to wish the wolf had softer sheep’s clothing.

      Someone shared this video as a comment on this article on facebook.

      It’s well worth a view. One of the things he says is that honest money legislation is a wolf in sheep’s clothing. Ben said something very similar on the Bad Quaker Podcast. Because in the debate between Gold Bugs and Green Backers over national policy the Green Backers are going to win for the same reason Keynes won the debate with Hayek in the minds of the State. Given two paths government will choose the option which justifies the most power in their hands.

      I don’t want libertarian philosophy and Austrian economics to give us a more successful government. That’s how Milton Friedman gave us income tax withholding. The government will always use our sound ideas as weapons against us. I say let them fail with their own ideas.

  2. Mit AilbuNo Gravatar says:

    The Feds existence isn’t the problem. We need to be fighting legal tender laws, not regulating private business.

    • Paul TNo Gravatar says:

      Mit Ailbu,

      Your allegedly private business, the Federal Reserve System, was established by government fiat. It’s BoG, it’s Board of Governors, are appointed by a president and confirmed by a legislature, or at least part of one. In fact, is it not true that the FRS must hand over to the government 100% of its profits? Probably this last feature was added to get suspicious bankers to go along with the establishment of the cartel. They would have feared a cartel endowed with the power to favor one or another of its member banks when profits are distributed.

      Nevertheless, you think that the FRS is a just another “private business”. So why not agitate for it to pay taxes at the same marginal rates as other private businesses? Why not demand an end to the practice of the government appointing members of its Board of Governors? Isn’t this what your code of justice requires for businesses that ought not to be regulated?

  3. Mit AilbuNo Gravatar says:

    Legal tender is legal plunder.

  4. Seth KingNo Gravatar says:

    This article brings up a really good point. This is yet ANOTHER reason why I don’t vote. I don’t want to reform the state. I want to abolish it.

    You know, this also kind of reminds me of what liberal statists often do. For example, the government forces people to subsidize the health care of others, even those that do not have insurance. So, their response is to pass some law forcing people to wear seat belts and motorcycle helmets. But libertarians are guilty of the same thing. They’re focusing their energies on auditing the fed, or abolishing it, when they “should” be focusing on the legal tender laws.

    Either way, it’s all fooey and I’d rather put my energies into growing the bitcoin economy than wasting countless resources and man hours attempting to reform government.

    • Matt WNo Gravatar says:

      Ding ding ding! This is the correct answer. In fact, this logic applies to the whole mess of government. We don’t have to *try* to dismantle it deliberately and methodically. The house of cards that is statism will fall apart all by itself, due to its own sheer inefficiency and incompetence. What we should be focusing on is developing alternative social and economic structures so that, when society collectively panics because the State is no longer functional enough to maintain order, we will have solutions that we can swoop in to provide. Bitcoin is one such solution. If we don’t already have alternative, stateless solutions tested and operational before the collapse, we will get something much, much worse than the tyranny we have now. Nature abhors a vacuum, and a power vacuum is no exception.

      • Paul TNo Gravatar says:

        Matt W,

        Indeed, we need alternatives to the economics and to the social relations preferred by statists. Yet to think that statism will wither away or fall apart on its own is naive, to put it politely. Statists are willful beings with an aggressive religion. Their willfulness must neutralized, as you should try to neutralize a punk before he conceives a plan to break into your home in the middle of the night to rob you. Superior organization is part of the solution, here, as even you concede.

        To establish appropriate superior organization will require of liberals an ability to think in harmony and to act in concert without shortcuts preferred by the superstitious, to give one example. For this, liberals need a religion, although that religion will not itself be liberalism. Rather, liberalism will be part of it. (Resist the popular urge to let leftists define the word.) The religion needs to be flexible enough to incorporate truths not yet known but firm enough to ward off consistently errors such as relativism and the adolescent skepticism of continuously doubting everything, even one’s own existence. The religion will need to undermine aversion to leadership, too. In other words, it must disdain anarchism.

        Now, what about this religion? Well, it needs a framework to guide its development. Since the religion will be a religion of lifelong learning, let’s try the following framework for lifelong study:

        (1) logic
        (2) linguistics
        (3) rhetoric

        (4) mathematics
        (5) physics
        (6) ethics
        (7) harmony

        I won’t attempt to justify the whole of it here, but it should be clear that I’ve let Martianus Capella inspire me. Note the progression of 1 through 6. First is correct reasoning. Next comes the study of language and the use of language, the better to communicate one’s learning. Next is quantitative reasoning followed by the study of the world in which we live. The sixth complements the first with the study of correct behavior, and even etiquette at the dinner table can be accomodated here.

        About the seventh I will add that it should not be confused with music. Of course, it remains true that learning to play music in harmony with others is conducive to learning the skills of teamwork that could be transferred to concerted action against statist aggressors. There are other techniques, however, for cultivating harmony, and the teamwork practiced during the process of academic peer review is one of them.

  5. PepNo Gravatar says:

    Certainly, libertarians ought to focus on economic solutions directly rather than concentrating attention on reshaping the state with ideas like auditing the Fed. To call it counter economics is a bit of a misnomer though since there isn’t any economic reasoning to a system which is forced on people without their consent. 🙂

    The Fed is not a business. An individual is free to criticize and oppose men who do unethical things to other people such as dictating choice in money.

    Top down central planning has enabled a lack of accountability. One such form is called corporatism. A libertarian has every reason to oppose corporate status altogether as it pertains to the rejection of authoritarianism.

    • Friltz KneseNo Gravatar says:

      Pep, I agree with you! In a real free enterprise corporations would likely not exist at least as we know them for they depend on governmental protection for their advantages. Also such a free enterprise society would have a lot less international trade since most other countries use what is effectively slave labor. There is no free enterprise where one party is a slave. Free trade can mostly exist between nearly equal economies. For example, free trade can be possible between the USA economy and Canadian or Australian economies where it can’t be with Chinese or even the Mexican economy for the labor pay rates are too disparate. Giant corporations like Wal-Mart are becoming even more rich and powerful by shipping things halfway around the world which can be made much more efficiently here but would require paying labor costs instead of using the nearly slave labor in China.

  6. Tom JNo Gravatar says:

    But then what would “Liberty candidates” run on.;-)

  7. John RingerNo Gravatar says:

    I read until I found the profound flaw in your position. OK, the Fed is a private corporation. BUT it is a private corporation that enjoys monoply protection by the government. It is also joined at the hip with the IRS, but that’s another subject. Fine, leave the Fed alone, but remove the legal tender laws Remove their momopoly on the US banking system. Allow people to exist outside the Federal Reserve System.

  8. AshleyNo Gravatar says:

    This seems like an important evolution of libertarian analysis. The article seems like it could be fleshed out, expanding on some examples and concepts to a feature length article.

    Another question has been buzzing at me since Seth brought up voting. There are positive externalities that come from your neighbour not waving guns around, and hence campaigns to propagate NAP. Are there positive externalities that come from your neighbour not voting that can justify Don’t Vote campaigns? Are we waiting for voter turnout to drop out so that we can point and say HA your government is no longer legitimate? Do we expect such a campaign to have more impact than the US federal government’s approval rating?

  9. Arya BagherpourNo Gravatar says:

    You do realize that this is precisely what Dr. Paul was trying to accomplish; allowing competition in money.

    • Bob RobertsonNo Gravatar says:

      Sometimes people have to hear the same thing said many different ways, or by many different people, (or both,) before it makes any sense.

      Abolish the legal tender laws, repeal the Federal Reserve act, confiscate all properties owned by what was established under that act, and let it go.

      What’s left is what the Fed.Gov requires taxes to be paid with. Constitutionally, that’s gold and silver only, with the unit of accounting being a 1-oz silver unit.

  10. jaymeezyNo Gravatar says:

    Arya is correct, Ron Paul wanted to legalize competition to the dollar to let the federal reserve destroy itself with its infinite devaluation of its own currency.

  11. peterpalmsNo Gravatar says:

    There is enormous wisdom and logic evidenced by all the comments. In the 5th edition published in September 2010 it is certainly made clear that we have lost control of those governing.

    It is also apparent to me that the FED does will collapse, as have the previous three central banks of the united States,.

    Since those ruling us are also fully aware that this, Thee plan seems to be, to eliminate the repaying anyone worldwide on those Notes by discontinuing the United States for a New World Government and a new global currency, which is also fully described in chapter 25. This new World order cannot become functional rality so long as the United states is able to go it alone.

    “truth will always be defeated by tyranny unless people are willing to step forward.and put their lives in tnto the battle” G.Eward Griffin.

    There is still time to protect the constitution.

    America is viewed as a potential bull in the china shop. Right now, it is safely under control, but the world planners are worried it might break loose in the future. If the American people were to awaken to the realities of world politics and regain control over their government, they still would have the military and economic power to break away. Among the world planners, therefore, it has become the prime directive to weaken the United States both militarily and economically. And this directive has come from American leaders, not those of other countries. CFR members sitting in the White House, the State Department, the Defense Department, and the

    Treasury are now working to finalize that part of the plan. It is yet one more doomsday mechanism that, once it gains sufficient momentum, will pass the critical point of no return.
    The Korean War was the first time American soldiers fought under UN authority. That trend has accelerated and now includes military actions in Iraq, Yugoslavia, Bosnia, Somalia, and Haiti. While the American military is being absorbed into the UN, steps are also underway to hand over American atomic weapons. When that happens, the doomsday mechanism will become activated. It will be too late to escape.
    Likewise, the IMF /World Bank is already functioning—in conjunction with the Federal Reserve System—as a world central bank. The American economy is being deliberately exhausted through foreign giveaways, endless wars, and domestic boondoggles. The object is, not to help those in need or to defend freedom or preserve the environment, but to bring the system down. When once-proud and independent Americans are standing in soup lines, they will be ready to accept the carefully arranged “rescue” by the world bank. The Euro is already in place as a regional currency. The Amero is next. These are but transitions to a planned world currency. From these, also, there will be no escape.

    My question is. What should patriotic Amercans do to save their country and When.

  12. DanielNo Gravatar says:

    Well put. The problem with this program, as with all others, is not solely that they are doing a poor job but that they are initiating aggression against others. Rolling back large portions of the federal government, such as legal tender laws and limitations on the payment of taxes, would indeed make the federal reserve a moot point.

  13. Rick DiMareNo Gravatar says:

    The Federal Reserve Corp. (Fed) is a complicated “quasi-public” legal entity, and although it’s been issuing an unconstitutional Federal Reserve Note since 1963, the Fed can play a useful role in one’s pursuit of “self-ownership,” but only if the Fed’s role as money-issuer is rejected and it is confined to the role of “fiscal agent” of the Treasury Department.

    Lawyers, law students, and law enthusiasts interested in discussing complex legal issues surrounding the Fed (and who also believe in non-violence) are welcome to join my new Facebook group entitled “Common Wealth Tax:” http://www.facebook.com/groups/CommonWealthTax/

  14. macsnafuNo Gravatar says:

    I don’t know why people struggle with the Fed. It’s a private bank, yes, but it has been granted certain monopoly privileges by the Federal government. Not to mention that, IIRC, The Fed Chair is appointed by the President, with Congressional approval.

    The simple point is that no central bank with the Fed’s monopoly privileges could exist without a government, thus there is no Fed in ancap.

  15. peterpalmsNo Gravatar says:

    QE3 will increase unemployment rather than create jobs. The Fed knows it. This is just a ploy. The purpose is fully described on pages 538 to 564 of the fifth edition, published September 2010 of the book “The Creature from Jekyll Island”. What must be done to avert this pessimistic scenario ; a list of specific measures that must be taken to stop the monetary binge ; an appraisal of how severe the economic hangover will be; is provided on pages 566 to 588

  16. Richard LongNo Gravatar says:

    Well said and well reasoned! I agree, don’t end the Fed just allow competing currencies and return to the treasury issuing legal tender for use in ALL debts public and private including those of the Fed. End of problem.

  17. Friltz KneseNo Gravatar says:

    Though I largely agree wiltch what you wrote here, I must say that the Fed may not be legally a part of the government, but in reality it is as much a part of the federal government as the IRS or CIA. Note that the Fed chairman is put there directly by the President of the USA. Your points about the monopolistic powers is a good one, but government always stifles free enterprise for free people are uncontrolable which is the last thing governmentd wants.

  18. jeffNo Gravatar says:

    I wouldn’t have a problem with the FED if it didn’t have a monopoly on the issuance of currency and was not allowed to engage in fractional reserve banking, but if those two functions were gone, why would it exist?

    • Rick DiMareNo Gravatar says:

      jeff, it’s actually a myth that the Fed has a monopoly on currency-issuance.

      Though the Fed has done many subtle and misleading “psycho-political” things to advance this myth, it’s quite possible to force the Fed into a benign and subservient role as Congress’ “fiscal agent” if we depositors were to demand Treasury-Direct coin and paper/electronic money at any U.S.-incorporated bank (under a 1819 landmark Supreme Court case known as McCulloch v. Maryland).

      However, the Treasury doesn’t presently provide circulating U.S. Notes, and Treasury-Direct electronic money is only available as an investment through http://www.treasurydirect.gov, so in order to legally object to Federal Reserve Notes we are unfortunately forced to demand “coin only” bank accounts (which doesn’t necessarily mean we have to take physical possession of the cumbersome cupro-nickel coins).

  19. dpalmeNo Gravatar says:

    I don’t know why, but it took me a month to read this article. Great points, and I couldn’t agree with you more. I’d like the fed to stick around for the long run. The longer the fed sticks around, the weaker the government will become.

  20. MAMNo Gravatar says:

    It’s not my system. So like other things that aren’t my system I’ll ignore it. Just like I do the police, and politicians (I wonder if there is an etymological relationship between those words). I will barter, and trade using things that I value with people who feel the same way. If I use fiat in the process so what? If I use it it destroys itself, if I don’t it disappears victory is inevitable.