I recently proposed that
the liberty movement capitalize on Brexit with "Fed-exit": a campaign to "secede" from
the Federal Reserve. Fed-exit could be accomplished with a few simple policy
changes.
Passing Audit the Fed is a good first step toward Fed-exit. Contrary to the
Federal Reserve's propaganda, auditing the Fed will not reduce the Federal
Reserve's mythical "independence." It will simply allow Congress and the people
to learn the full truth about the Fed's conduct of monetary policy.
However, the desperation with which the Fed fights the audit bill suggests
it believes increased transparency will boost support for Fed-exit. Considering
what we discovered from the limited audit of the Fed's activities during the
2008 financial crisis, the Fed's fears may be justified. That audit revealed
that between 2007 and 2008 the Federal Reserve loaned over $16 trillion --
more than four times the annual budget of the United States -- to foreign central
banks and politically-influential private companies! Imagine what would be
revealed by a full audit that includes looking at the Fed's recent explosion
of money creation via "quantitative easing."
Once Congress and the public know the full truth about the Fed's operations,
we can begin working on ending, or at least reining in, the Fed. A good next
step would be to explicitly forbid the Fed from making "loans" to private
businesses or foreign governments. Section 13(3) of the Federal Reserve Act,
which the Fed claims gives it the authority to provide "emergency assistance" to
private companies, must be repealed.
Congress should also pass legislation reversing President Ronald Reagan's
executive order creating the "Plunge Protection Team." Created after the 1987
stock market crash, the Plunge Protection Team's "job" is to intervene whenever
the financial markets appear to be on the verge of a meltdown, in order to
prolong the Fed-created illusion of economic prosperity.
Congress should also restrict the Fed's ability to purchase government securities,
which the Fed uses to monetize the federal debt. Congress should also stop
the Fed from manipulating interest rates. These actions would reduce the economic
instability wrought by the Fed's monetary policy. Ending the Fed's monetization
of the debt could also force Congress to not just halt the growth of, but actually
begin to roll back, the welfare-warfare state.
The best way to rein in the Fed is to restore the gold standard. However,
this must be a true gold standard, not the phony post-war Bretton Woods gold
standard or the "gold price rule" promoted by the supply-siders. The "gold
price rule" requires the Fed to raise interest rates whenever the price of
gold matches or exceeds a Fed-determined target. Thus, this rule still allows
the Fed to attempt to "fix" the price of money. It just provides the Fed with
another after-the-fact indicator that the latest inflationary bubble is about
to burst.
The most important step toward Fed-exit and the restoration of a true free-market
monetary system is the repeal of all laws that in any way restrict individuals
from using alternative currencies. Under a free-market monetary system, some
individuals will choose to use metal-based currency, while others will choose
to use digital currency. Some many even stick with fiat money. The important
factor is not the type of currency individuals use, but that people have the
right to decide for themselves what unit of exchange they use for their economic
transactions.
As long as the Federal Reserve is allowed to manipulate the value of money
and support the welfare-warfare state, we will never have a truly free market
or a free society. Therefore, all those who seek liberty, peace, and prosperity
should join the effort for a Fed-exit.
