Before the Federal Reserve was founded, the nation was plagued with financial crises. At times, these crises led to “panics” in which people raced to their banks to withdraw their deposits. The failure of one bank often had a domino effect, in which customers of other banks rushed to withdraw funds from their own banks even if those banks were not in danger of failing. Banks needed a source of emergency reserves to prevent the panics and resulting runs from driving them out of business.
A particularly severe panic in 1907 resulted in bank runs that wreaked havoc on the fragile banking system and ultimately led Congress in 1913 to write the Federal Reserve Act. The Federal Reserve System, initially created to address these banking panics, is now charged with several broader responsibilities, including fostering a sound banking system and a healthy economy.
I agree that a central banking system is necessary to maintain a sound banking system and a healthy economy. However the current system has proved to be unsatisfactory in doing so. The Federal Reserve System was devised by the wealthiest families in America on order to help and control the monetary system of America. The problem is that the FED has failed in its quest for monetary soundness. The Federal Reserve System was designed to be complicated and is a deliberate mystery. It was deliberately designed in 1910 to deceive the public, who were opposed the idea of a central bank. The conspirators who met on Jekyll Island in November 1910 knew this. The system was devised by a group of big money families under the idea that it would provide safety to our economy in tough times. The general public today knows little about the FED. Prior to Ron Paul’s Presidential run in 2008, far fewer people understood it.
If there was no Federal Reserve it could be replaced by either the free market or Congress. People who think of themselves as free market people often are not. The tax-funded public schools and the state-regulated and accredited university faculties have taught that the modern system of intrusive civil government is necessary for an orderly society. People cannot imagine a market-based society. The free market is growing world wide and times have changed radically. The Fed is an outdated and harmful system to protect our money and our people. The free market social order is expanding around the world, which is why the world is getting richer. At the Federal level, a free market social order in banking existed prior to 1914. That was back when the dollar was worth over 20 times what it is worth today. One only needs to look at inflation as calculated by the Bureau of Labor Statistics. The free market used to control the system and must again.
The free market will determine which will survive and which will not. This isn’t a radical idea at all since there is historical precedents for it. There are two historical cases: the refusal of Congress to renew the charter of the Bank of the United States in 1811, and the refusal of Congress to renew the charter of the Second Bank of the United States in 1836. Both of those central banking systems went bust and we survived. The standard response is that there must be independence between the Federal Reserve System and the U.S. government. This is ridiculous since there exists no such separation with most other agencies. The Department of Defense,The Department of the Treasury,The Department of State and The Department of Education all are established with government. We could list all of the thousands of agencies that are funded by Federal taxes and which operate by means of the authority of the U.S. government.
Whatever replaces the FED will decide the economic fate of Americans. A system controlled by Congress will only lead to hyperinflation. A system controlled by the free market will lead to economic stability. The central bank faces a big problem in order to maintain the boom, the FED must inflate. To cease inflating would allow the credit bubble to implode on a scale far more devastating than what happened in 2008. The monetary policy they follow must produce hyperinflation at some point. That will destroy the FED”s ability to guide the economy. Hyperinflation will lead to alternative currencies.