View Full Version : Federal Reserve: benefit or plague?

Otter Mii-kun
December 14th, 2008, 5:06 PM
This is a debate on the benefits and plagues of central banking, including the Federal Reserve System. Also discussed are accounts of monetary history, including the "gold standard", "fiat money" and "fractional reserve banking", among others.

Virtually all currencies in the world are fiat money, managed by central banks. With the advent of central banking, individual countries began to phase out commodity standards backing of their currencies (e.g. gold standard or silver standard).
To put simply, fiat money is money backed by nothing other than central banking or government guarantee. It cannot be exchanged at treasuries for gold or silver (or any other monetary commodity).
Most of the money circulating today is paper money. Many, many years ago, (long before the "New Deal") much of the money in circulation in the U.S. were gold and silver coins.

This debate can apply not just to the Federal Reserve System, but also to other central banks around the world (such as the Bank of England, Bank of Japan, Reserve Bank of Zimbabwe, etc.)

Many see the Federal Reserve and other central banks as "beneficial" to the economy-to "reduce unemployment", "provide liquidity to the markets", maintain "solvency" of banks, bail out failing banks (lender of last resort), and also to "manage trade balance" and even to "allow for elastic currency".

Opponents of central banking see it as inflationary-that all price and money supply inflation comes from central banking activity. Also, it's said that central banking enables booms and busts, such as the "Roaring 20s", the dot-com bubble, and the housing bubble. This is achieved by artificially manipulating interest rates and rapidly expanding credit availability, which encourages individual banks to lower lending standards-sometimes as far as to lend out to people and businesses that are not even credit-worthy to begin with. Also, opposition points out that central banking provides for a fraudulent banking system that scams individuals and businesses who put their money in the banking system.

Disclosure: If you haven't already seen my previous posts on economics, I strongly oppose the Federal Reserve, or central banking of any kind.
Money, Banking, and the Federal Reserve
(Ludwig von Mises Institute (http://mises.org), 1996)
(If you've been to my profile recently, you'll probably have already noticed this video in it)
Description: Thomas Jefferson and Andrew Jackson understood "The Monster". But to most Americans today, Federal Reserve is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.

Dedicated to Murray N. Rothbard, (1926-1995) steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary new film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.

(Alan Greenspan and Ben Bernanke are not), we're told, happy about this 42-minute blockbuster. Watch it, and you'll understand why. This is economics and history as they are meant to be: fascinating, informative, and motivating. This movie could change America.