“The Federal Reserve should be abolished because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty. It’s destructive nature makes it a tool of tyrannical government.” -Ron Paul in his book End The Fed
To quote a review from New American, End The Fed is “A must read for every American who can spell his name.” I concur. The book invokes a certain fear about the constant inflation of our currency and the already experienced hazards of Keynesian economic theory. Former congressman, Ron Paul provides an educated opinion on the nature of the federal reserve, and a systematic approach to why and how it must be ended. The first paragraph of the book effectively introduces his argument, titled Why You Should Care it explains to the reader why The Federal Reserve effects every world economy and particularly affects the average American negatively. The central section of the book provides some of Paul’s essential background, specifically his interactions with the past 2 federal reserve chairmen, a lesson in Austrian economic theory and findings of a congressional Gold commission. The meat of Paul’s argument against Federal Reserve is found in the latter half when he lays out a philosophical case, a constitutional case, a economic case and a Libertarian case.
Certain people are probably confused by now. For the sake of Clarification: The Federal Reserve is an autonomous Central bank of the United States. It’s powers include, but are not limited to coining money, setting minimum interest rates and loaning reserve currency to banks. Ron Paul, a Libertarian, wrote a book entitled End The Fed I read that book and I am summarizing my agreement with his analysis of The Federal Reserve being a destructive institution…
Quite obviously I cannot adequately cover Dr. Paul’s extensive argument. My hope is that you would read Paul’s entire argument for yourself. However, I doubt that most readers will do this and i would like to describe a few points that stuck out to me.
First, central banks are a helpful asset to tyrants. Possibly, the best explanation of this point is to quote some of Paul’s own words…
Karl Marx’s fifth plank of the communist manifesto is clear: “Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.” This does not mean that everyone who advocates a powerful central bank is a communist. It does mean that if one is inclined toward authoritarian rule, a central bank is of the utmost benefit.
Second, it incentivizes irresponsibility on the behalf of the Federal government. Under this category falls many sub-points. Through the Federal Reserves powers to create money and buy government debt, government is able to subsidize their constant wars, and separate war as an economic venture. It is able to debase it’s own currency through inflation, indirectly cutting the size of it’s debt. It is able to ignore Moral Hazard through endless bailouts of companies “to big to fail”, thus eliminating needed incentives for large corporations to make wise decisions. At the same time government turns a blind eye to reckless behavior because the Federal Reserve, because it is separate from congress, but given authority and confidentiality by congress.
Third, and perhaps most important, The Federal Reserve undermines the value of money, working contrary to the free market. Despite what you might have been told in school, Deflation is inherently positive, and it is what would naturally take place in a truly free market. Everybody benefits from currency that rises in value. In a free market, this rise in value would naturally take place due to increased efficiency in production. With a commodity currency this would easily take place because of the commodity’s natural scarcity. What’s more, the commodity could be divided into increasingly smaller chunks as it’s value rose. With inflation, the opposite takes place, the purchasing power of currency falls, prices rise and the drop in real prices is small if even existing.
The Federal Reserve monopolizes banking and debases currency. It’s dangers are extreme, and also very sneaky. I conclude with Ron Paul’s own concluding remarks:
“We have a natural, God-given right to our lives, our liberties, and the fruits of our labor.
Protecting those rights is the only role that government ought to have in a free society…
Freedom and central banking are incompatible. It is freedom we seek, and when that precious goal is achieved, the chant “End The Fed!” Will become a reality.”