For months now I’ve been experiencing some serious cognitive dissonance. I think it actually started over a year ago while I was staying at the Occupy San Francisco encampment set up in front of the Federal Reserve. I was invited, among others, to speak about the history and function of the Fed. In 2003 Edward Griffin’s book, “The Creature from Jekyll Island” set a brush fire in my mind, and I have largely used his arguments against the Fed, specifically that the Federal Reserve is not Federal, and not a reserve. Griffin adds that the Federal Reserve System is not a system, but that distinction really only carried weight at a time when calling it a “system” obfuscated the fact that it’s a central bank. These days most people don’t mind a central bank the way they did in 1913, but hearing for the first time that the Federal Reserve is not Federal can be jarring for people, and often it gets their attention long enough to explain that it’s actually a cartel of private banks issuing a debt based fiat currency. But at Occupy San Francisco I learned that there’s a whole different way that some people look at the problem.
One group, we’ll call them “Gold Bugs,” tends to focus on the “Reserve” part of the lie, railing against the folly of fiat money, and advocating a gold backed national currency. But there’s another group, which I’ve since learned are called “Green Backers” who focus on the “Federal” part of the lie. In their view paper isn’t the problem, and gold isn’t the answer. Private profit is the problem, and nationalizing the Fed so that the issuance of fiat paper is controlled by Congress is the answer.
Now, I’ve learned enough along the way to know that “nationalize” is a dirty word, but because of Edward Griffin and all the Gold Bug talking points I’d picked up I was accustomed to arguing that the Fed being privately held was at least part of the problem. So, that contradiction bounced back and forth in my head like tennis ball for about a year. But now, thanks to Ben Stone from Bad Quaker Dot Com I think I’ve reconciled my thinking.
Ben recently did an episode of the Bad Quaker Podcast titled “Do Libertarians Want Government to Fix Government” in which he discusses a wide variety of issues in his delightful meandering way. In it he asserts, in no uncertain terms, that the Federal Reserve is a private corporation, and libertarians have no business asking Congress to audit or abolish privately held companies. Well, that scratched my brain right where it itched.
For some reason, even though libertarians trumpet that the Fed is a private banking cartel, we’ve been treating the problem as if it was a government agency, just as we’ve advocated the abolition of the IRS, or the Department of Education or the CIA. In reality we should take the same approach we take with all corporations. We should be dissolving the public/private partnership. The problem is not profit. The problem is not bureaucracy. The problem is not even economics. The problem is aggression. The problem is the monopoly privilege granted to the Fed by the State through legal tender laws. That is why Senator Nelson Aldrich was invited to that meeting of bankers on Jekyll Island in 1910. If they’d just wanted to form a cartel they wouldn’t have needed a Senator. They needed Aldrich because they needed the color of law.
Fundamentally I don’t care if they audit the Fed. There is nothing Congress could tell me about the Federal Reserve that would convince me to support it. But now I’m thinking I don’t really care if they abolish the Fed either. Why shouldn’t Ben Bernanke print as much paper as he wants? It’s no crime to put ink to paper. Destroying the value of paper by overprinting is no more a tax than destroying the value of iPods by over manufacturing would be. But we wouldn’t demand a congressional audit of Apple. The same economics applies. The Federal Reserve’s product is dollars. What business is it of Congress how much product a private company produces, or what they sell it for, or who they lend it to?
The act of aggression in the Federal Reserve System is not the printing of money, or the inflation of prices. It’s the enforcement of legal tender laws, and the stifling of competition by the State. It’s the fact that the State demands taxes in dollars, so even if the counter economy had sufficient labor, commodity and capital to sustain without transacting in the dollar economy the Feds would still come after us demanding dollars. It’s the fact that the State goes after almost every viable alternative currency whether it’s the Liberty Dollar or the Gold Dinar and finds some pretense to shut them down. Without this aggression from the State the value of paper would be subject to natural market forces and the Federal Reserve would be little more than a novelty certificate printing company.
So, I’m going to keep wearing my End the Fed t-shirt, and so should you if you’ve got one. But when people ask me what it means I’m not going to go into a long rant about the history and function of the Federal Reserve. I’m going to tell them what I really want deep down. I want to abolish the Federal Government.