I finished Ron Paul's End the Fed. In my latest reading, Paul contends that the monetary and banking problems of the nineteenth century, which were prior to the Federal Reserve, were due to government policies, such as "periodic suspensions of payment, inflationary wars, crazy price-fixing rules under the bimetallism system, and other forms of debt finance", and that the free market banking system from 1830-1860 was "remarkably stable and safe, with no widespread fraud", contrary to pro-Federal Reserve propaganda (pages 190-191). Paul wants a situation in which "Markets are self-regulating, responding to the wishes of consumers" (page 190). And, on page 206, he even proposes that we put "the power of free enterprise to work in the area of choosing which money is best", which may mean that he supports people being allowed to choose their own money. On the page before, he praises the days when there were "no restrictions on private minters".
read a couple of pro-Federal Reserve items. One thing that I read was
by economist Edward Flaherty, who was criticizing G. Edward Griffin's
anti-Federal Reserve book, The Creature from Jekyll Island.
Flaherty argues that each state having its own bank was problematic (due
to such things as counterfeiting and instability in the money supply)
as well as tells the tale of how the Banking Panic of 1907 led to the
creation of the Federal Reserve. Flaherty also states that "Conspiracy
theorists have long viewed the Federal Reserve Act as a means of giving
control of the banking system to the money trusts, when in reality the
intent and effect was to wrestle control away from them." You can read
Flaherty's article here, and Griffin's response to Flaherty here.
Second, I read a comic book talking about the origins of the Federal Reserve. There are other Federal Reserve comic books that I may read in the future, and I actually learned about them from Ron Paul's End the Fed.
what I read (I read one comic book in its entirely, and only part of
another one), some things that I read elsewhere were reinforced, and
some things were explained a little more clearly. I referred a couple
of posts back to Paul Krugman's argument that the gold standard was
faulty because you cannot control the supply of gold, and so basing the
dollar on gold can be unpredictable. One of the comic books
said that the supply of gold and silver expanded at times due to mining
and trade, and that there were other times when gold left the country
due to trade. I think that the comic book was arguing that gold lost
its value as its supply increased, bringing about inflation, but that
deflation resulted when it was scarce. Gold was having an effect on
prices, but there was really no way to control its supply.
comic book explained how increasing the money supply lowers interest
rates, which is something that I've been wondering about. When
there isn't as much money to go around, banks want to hold on to what
they've got, and so they're reluctant to lend it out. Consequently,
they charge high interest rates. But when there is a lot of money to go
around, they don't have that problem, and so the interest rates are
One of the comic books made the point
that the Federal Reserve is independent of politics. But Ron Paul would
disagree with that claim, for, on pages 115-116, he says that
Arthur Burns as chairman of the Fed pulled some monetary stunts in an
attempt to get President Jimmy Carter to reappoint him. Paul also
argues that one reason that the Federal Reserve exists is to support big
government----to provide money for government programs and wars, and
also to use inflation as a means to solve the debt problem (since, as I
said in an earlier post, what was a lot of money when you borrowed it
becomes not-so-much-money when there is inflation).
I have much to
learn about economics. But I enjoyed reading Paul's book and writings
in favor of the Federal Reserve because that helped me to learn more.
My conclusion, if I have one, is that there are strengths and weaknesses
to any system. That's true with the Federal Reserve, and it was most
likely true before the Federal Reserve. There has to be some
legitimate reason for an institution to come into being, otherwise it
would not be sold as an idea. But I would not be surprised if
power-plays were (and are) a part of the equation, as well.
Pastor James Kambugu of Uganda
11 hours ago