End The FED. Get The Gold By Gary North

When you hear a self-designated free market economist defend the idea of central banking, meaning a government-licensed monopoly over the monetary base, you can be sure that this person does not believe in the free market. He does not believe in the logic of decentralized private property. He believes in central planning, and he sees the central bank as the agency of such planning.

The few academic economists who are willing to accept even a pseudo-gold standard do not believe the government should be out of the money business. They do not believe in the widespread use of gold coins by the general population. They believe in central banks, and they believe in government control over the banking system.

What I recommend is simple: the removal of all government authority possessed by the Federal Reserve System. There would be no further legal connection between the Federal Reserve System and the United States government.

What would the result be? Within a few years, the Federal Reserve System would go bankrupt. This has been the fate of the two previous central banks of the United States. They could not operate in a competitive environment. They could operate only by means of a grant of monopolistic power by the United States government. So, I am not at all worried about the operation of the Federal Reserve System without government supervision. Besides, there is no government supervision of the Federal Reserve System. There is supervision of the government by the Federal Reserve System. Congress does not control the FED: the FED controls Congress. This has been true since 1914, and it is not likely to change.

Should this ever change, however, the power of money will be transferred to the United States Congress. That is far more fearful then idea of control over money by the Federal Reserve System. The Federal Reserve System at least tries to make its clients some money. Congress would be unrestrained by any fear of inflation. The Congress would simply buy votes directly with newly created money. There would be no concern about the proper allocation of capital. There be no concern about profit and loss potential of the banking system. There would simply be the printing press in the hands of the Congress.

There are people out there (“Greenbackers”) who call themselves conservatives, but who believe that the Congress of the United States is reliable in the area monetary policy. They oppose the Federal Reserve System, but only on the assumption that all power over money should be transferred to Congress. I can think of no better prescription for mass inflation, followed by hyperinflation, than this recommendation.

CONCLUSION

If we were to abolish the Federal Reserve System, and if the government would then transfer to American voters all of the gold presently said to be in the vaults of the Federal Reserve Bank of New York and Fort Knox, we would see the restoration of liberty. I can think of no other pair of laws that would transfer more authority to the voters the abolition of the Federal Reserve system and transfer of the gold in the form of tenth-ounce coins back to the voters. This is why this essay is hypothetical.

Who are the opponents of such a procedure? First, the Congress of the United States. Second, all the bureaucrats who work for the Federal government. Third, all of the decision-makers of the Federal Reserve System. Fourth, the vast majority of all commercial bankers. Fifth, the entire academic economics profession. This is why we are unlikely to see this pair of laws passed in our generation.

The Powers That Be fear the transfer of authority over money to the general population, because that would transfer enormous power politically into the hands of the people. It would let them veto the spending policies of the Federal government. The fear of that veto is great inside the Washington Beltway.

Credit: End The FED. Get The Gold By Gary North