Federal Reserve Bank as Archaic Fetish

In the past seven decades the field of economics has claimed to be able to "manage the money supply" to prevent booms and busts. As well, the questionable institution of fractional reserve banking has relied on repeated government support and bailouts. These include the lending fiasco surrounding commercial banks' support of the Hunt Brothers' attempt to corner the silver market in 1980 (which ended not because of the threat of regulation as I have heard on television but because the Hunt brothers defaulted on a 650 million dollar futures contract with Englehard Mining, resulting in massive defaults on the commercial bank loans that were supporting their frivolous effort) as well as the Long Term Capital Management fiasco. Much worse than either of these has been the Fed's ongoing subsidization of the financial sector of the economy through monetary expansion and the working of destructive political deals with foreign governments that will cause grievous harm to these developing countries. Hedge fund managers and Wall Street executives have contributed no value to the economy, have extracted large salaries and have used the edifice of the liberal media to justify themselves.

The economics profession has claimed expertise that it does not have. The economics of public policy is a smoke screen to justify providing bankers who destroy rather than create value with enormously bloated salaries, to falsely boost the stock market and allow hedge fund managers to extract wealth from a naive public.

The economists who for seven decades have claimed that the gold standard is an antiquated relic have to face the failure of their policies. The elegant edifice of macroeconomic planning has turned out to be a chimera. The Federal Reserve Bank is a failed institution. It is an archaic fetish.

The fetishizers of central banking, the very interests that have benefited from the bamboozling of the American public, will undoubtedly argue that a 68% increase in the monetary base over one month and a trillion dollar bailout of institutions that have been extracting Americans' wealth and perverting economic incentives for seven decades are necessary.

We would do well to recall that the most fertile economic period was the one from 1830 to 1913, when there was no central bank. Real wages increased, innovation occurred at a fever pitch, much greater than in the declining twentieth century, and there was deflation. Yes, deflation. While employment levels were skyrocketing, unemployment was low and innovation was exploding, businessmen and real estate speculators complained endlessly about "depression". What they meant by depression was that profits were too low. Today's historians, reading the frequent discussions of "depression" in the 1870s, 1880s and 1890s conclude that there were low wages. They are wrong. Wages were escalating and unemployment was low in the gold standard/no central bank period. But profits were "depressed" and firms kept complaining about profits. Remarkably, immigration exploded during the late nineteenth century, yet there were enough jobs for the immigrants at wages that were much, much higher than 40 years previous (say 1889 versus 1849).

The economist David Ames Wells discusses all this in his book "Recent Economic Changes" published in 1889. Historians know about the book, but they either ignore it or don't bother to read it, because it contradicts everything they tell you about laissez-faire America. Wells, incidentally, was commissioner of revenue under Abraham Lincoln and Andrew Johnson.

Thus, the gold standard made real estate speculators, stock speculators and bankers poorer than they have been under the Fed. But it made workers richer. Fraudulent quacks like Paul Krugman go around saying that taxes are necessary for lower income inequality. But income inequality was declining in the late nineteenth century, about which today's historically ignorant economists are unaware.

It is time for the American people to wake up to the fact that there is no legitimate field of "macroeconomics" and that the entire edifice of government-subsidized finance is a scam that has been instituted to steal money.