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Authors: Andrew P. Napolitano
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constitutional monetary system and replaced it with paper and public debt.
Then, when some financial institutions attempted to privatize, the Monetary Control Act of 1980 granted to the Federal Reserve control of all national depository institutions, so that all financial institutions that offered deposits against which checks could be written were now under its control, whether or not they had ever been a part of the Federal Reserve System. 14 Now the monopoly was also granted the ability to force cartelization on those who wanted to remain private.
The public debt continues to grow exponentially with no end in sight. While the cost to the Federal Reserve for printing a note of any denomination is four cents and the Federal Reserve prints money from air, it charges the federal government interest for the monetary
loans. As well, the Federal Reserve earns interest on the government securities in its ownership. Therefore, the Federal Reserve makes money each time it prints money, and thus it is encouraged to print more money, no matter whether it has any gold to back it up.
The term “reserve” is highly fallacious. The Fed does not want to reserve or save; it wants to spend, because the more it spends, the more interest it makes. The only president to issue an Executive Order beginning the process of abolishing the Fed was President John F. Kennedy, and he was dead three weeks later. His Executive Order Number 11110 returned to the Treasury Department its constitutional authority “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.” 15
Essentially, the President intended to give back to the federal government the ability to introduce currency backed by silver, without any need for a Federal Reserve. Each ounce of silver, at that time totaling about $4 billion in the government’s possession, could back the new currency. The effect on the Federal Reserve would have been that the new silver-backed money would become preferred to Federal Reserve Notes, which were not backed by anything, and therefore the new currency would eventually end the need for the Federal Reserve and its monopoly money. 16
As to the justification for the creation of such a financial behemoth that has come to control every aspect of our monetary policy, where is the economic stability and prosperity promised to us? Since the creation of the Federal Reserve, we have experienced the Great Depression, a recession in the early 1980s, the market crash of 1987, and finally, the economic crisis we find ourselves in today. And during all these events, there has also been the constant depreciation of the dollar. These are the result of the inflationary habits of the Federal Reserve, inflationary habits that no one can control or prevent, not without the abolition of the Fed. Rather than dethroning the moneyed elite, the Federal Reserve was their vehicle for a further power grab.
As F. A. Hayek, a noted Austrian economist, once said, “[t]o put it [money] in the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will never give us good money.” 17 The American dollar today is worth just 7 percent of what it was worth in 1913, when the Fed was established to stabilize it .
Money Does Grow on Trees
Those who argued for the Federal Reserve Act focused on the fact that we needed to ensure that our currency was “flexible.” They argued that this flexibility was crucial to ensuring that the federal government and the country did not run out of money. Where they criticized the gold standard for not being able to sustain the economy and allow for growth, they argued that this protection would ensure that we never ran out of money. In essence, the Federal Reserve Act brought into law the idea that money could come from nowhere. Not many people realize how the system works, or
Then, when some financial institutions attempted to privatize, the Monetary Control Act of 1980 granted to the Federal Reserve control of all national depository institutions, so that all financial institutions that offered deposits against which checks could be written were now under its control, whether or not they had ever been a part of the Federal Reserve System. 14 Now the monopoly was also granted the ability to force cartelization on those who wanted to remain private.
The public debt continues to grow exponentially with no end in sight. While the cost to the Federal Reserve for printing a note of any denomination is four cents and the Federal Reserve prints money from air, it charges the federal government interest for the monetary
loans. As well, the Federal Reserve earns interest on the government securities in its ownership. Therefore, the Federal Reserve makes money each time it prints money, and thus it is encouraged to print more money, no matter whether it has any gold to back it up.
The term “reserve” is highly fallacious. The Fed does not want to reserve or save; it wants to spend, because the more it spends, the more interest it makes. The only president to issue an Executive Order beginning the process of abolishing the Fed was President John F. Kennedy, and he was dead three weeks later. His Executive Order Number 11110 returned to the Treasury Department its constitutional authority “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.” 15
Essentially, the President intended to give back to the federal government the ability to introduce currency backed by silver, without any need for a Federal Reserve. Each ounce of silver, at that time totaling about $4 billion in the government’s possession, could back the new currency. The effect on the Federal Reserve would have been that the new silver-backed money would become preferred to Federal Reserve Notes, which were not backed by anything, and therefore the new currency would eventually end the need for the Federal Reserve and its monopoly money. 16
As to the justification for the creation of such a financial behemoth that has come to control every aspect of our monetary policy, where is the economic stability and prosperity promised to us? Since the creation of the Federal Reserve, we have experienced the Great Depression, a recession in the early 1980s, the market crash of 1987, and finally, the economic crisis we find ourselves in today. And during all these events, there has also been the constant depreciation of the dollar. These are the result of the inflationary habits of the Federal Reserve, inflationary habits that no one can control or prevent, not without the abolition of the Fed. Rather than dethroning the moneyed elite, the Federal Reserve was their vehicle for a further power grab.
As F. A. Hayek, a noted Austrian economist, once said, “[t]o put it [money] in the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will never give us good money.” 17 The American dollar today is worth just 7 percent of what it was worth in 1913, when the Fed was established to stabilize it .
Money Does Grow on Trees
Those who argued for the Federal Reserve Act focused on the fact that we needed to ensure that our currency was “flexible.” They argued that this flexibility was crucial to ensuring that the federal government and the country did not run out of money. Where they criticized the gold standard for not being able to sustain the economy and allow for growth, they argued that this protection would ensure that we never ran out of money. In essence, the Federal Reserve Act brought into law the idea that money could come from nowhere. Not many people realize how the system works, or
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