A week from now, the Federal Reserve System will celebrate the 100th anniversary
of its founding. Resulting from secret negotiations between bankers and politicians
at Jekyll Island, the Fed's creation established a banking cartel and a board
of government overseers that has grown ever stronger through the years. One
would think this anniversary would elicit some sort of public recognition of
the Fed's growth from a quasi-agent of the Treasury Department intended to
provide an elastic currency, to a de facto independent institution that has
taken complete control of the economy through its central monetary planning.
But just like the Fed's creation, its 100th anniversary may come and go with
only a few passing mentions.
Like many other horrible and unconstitutional pieces of legislation, the bill
which created the Fed, the Federal Reserve Act, was passed under great pressure
on December 23, 1913, in the waning moments before Congress recessed for Christmas
with many Members already absent from those final votes. This underhanded method
of pressuring Congress with such a deadline to pass the Federal Reserve Act
would provide a foreshadowing of the Fed's insidious effects on the US economy
-- with actions performed without transparency.
Ostensibly formed with the goal of preventing financial crises such as the
Panic of 1907, the Fed has become increasingly powerful over the years. Rather
than preventing financial crises, however, the Fed has constantly caused new
ones. Barely a few years after its inception, the Fed's inflationary monetary
policy to help fund World War I led to the Depression of 1920. After the economy
bounced back from that episode, a further injection of easy money and credit
by the Fed led to the Roaring Twenties and to the Great Depression, the worst
economic crisis in American history.
But even though the Fed continued to make the same mistakes over and over
again, no one in Washington ever questioned the wisdom of having a central
bank. Instead, after each episode the Fed was given more and more power over
the economy. Even though the Fed had brought about the stagflation of the 1970s,
Congress decided to formally task the Federal Reserve in 1978 with maintaining
full employment and stable prices, combined with constantly adding horrendously
harmful regulations. Talk about putting the inmates in charge of the asylum!
Now we are reaping the noxious effects of a century of loose monetary policy,
as our economy remains mired in mediocrity and utterly dependent on a stream
of easy money from the central bank. A century ago, politicians failed to understand
that the financial panics of the 19th century were caused by collusion between
government and the banking sector. The government's growing monopoly on money
creation, high barriers to entry into banking to protect politically favored
incumbents, and favored treatment for government debt combined to create a
rickety, panic-prone banking system. Had legislators known then what we know
now, we could hope that they never would have established the Federal Reserve
System.
Today, however, we do know better. We know that the Federal Reserve continues
to strengthen the collusion between banks and politicians. We know that the
Fed's inflationary monetary policy continues to reap profits for Wall Street
while impoverishing Main Street. And we know that the current monetary regime
is teetering on a precipice. One hundred years is long enough. End the Fed.