Ending the Fed is not a panacea. Events like the financial panic of 1907 made the Fed bill popular (the press at the time dubbed it the “bank bill”). During the panic, cash was in such short supply, merchants had to sign promissary notes agreeing to pay greater than face value just to get enough cash to transact business. These were not loans; these agreements were just to obtain cash on hand. There was no mechanism, like the Fed, to increase the money supply.
Of course it’s not a panacea, there is no such thing. Never has been and never will be, at least of human origin anyway. If you read G. Edward Griffin’s “The Creature from Jekyll Island”, he lays out the reasons behind and the proper solutions to many of the financial panics and bank runs in U.S. History.
Before the creation of the Federal Reserve, most of the panics were very short term and only ended up in the liquidation of a few smaller banks or other institutions who were much too careless with their financials. Yes, it affected average citizens when a corrupt bank failed, but the results were short term and not widespread. The Federal Reserve ended these common, albeit small, panics and replaced them with a “managed” economy. Now, the masters of The Fed manipulate the system on a long term basis so instead of multiple small panics which are fairly easy to deal with, you get huge disruptions like The Great Depression that go on for years and affect everyone in the country and sometimes beyond.
You will always have pain and suffering when it comes to the management of money, because some people deal honestly while others steal. The Fed just institutionalizes that theft and makes it impossible for the average citizen to do anything about it. It’s easy to avoid a corrupt bank or two, it’s impossible to avoid a corrupt managed economy.
Also, to your argument about merchants signing promissary notes during a panic. You claim that these were “not loans” because it was “just to obtain cash on hand”. A promissary note is, by definition, a loan, it doesn’t matter what the loan is for. They borrowed something and promised to pay it back, usually plus interest. That’s a loan. You would rather a business didn’t get a loan of actual money for operating funds from some small trustworthy bank, but instead had The Fed create fiat money out of thin air and then loan it to a FDIC bank, who then loans it to you? So not only do you pay interest to the FDIC bank on the fake money they loaned you, you also pay the other “tax” created by fiat money which is inflation?
“not loans”
During the panic of 1907 it was like this, you’re a business owner and you have money in the bank. You go to the bank to make a withdraw of cash to conduct your business, and the bank tells you “we can give you a check or a draft but we can’t give you cash because we don’t have any on hand”. That’s when some entrepreneur approaches with an offer, “I have cash, but you agree to pay me back 110% when cash again becomes available”. I agree it functions like a loan, but the difference is the business owner has money in the bank, he just can’t access it in cash form. The cash supply had died up.
After reading that Smithsonian article, I just can’t help myself. The article states:
“What are the differences between the panic of 1907 and the crisis of 2008? Three factors stand out: higher complexity, faster speed and greater scale.”
Going back to what I said in my first reply, the 2008 panic was of “greater scale”. Of course it was, because the economy has been manipulated by the Federal Reserve. Thanks for making my point for me Smithsonian, although it’s pretty pathetic to admit this then endorse the creation of The Fed.
The article later says:
“What did Morgan do to stop the panic? You quell panics by organizing collective action to rescue institutions and generally convey confidence back into the market.”
No, no, no, no, no and fuck no. You quell panics by letting the dishonest institutions go out of business. Sure, they are going to take their depositors money with them, but maybe those people will learn to deal with an honest bank next time. People are not suddenly absolved of all responsibility just because they claim, “but my bank told me…”. You stick a fork in a power socket, you get shocked. You put your money in an insolvent bank, you lose your money. Too big to fail anyone?
The paragraph titled “Was Morgan practicing a kind of ‘profitable patriotism’?” is particularly egregious. Yup, good ‘ole J.P. manipulated the system out of sheer altruism. He became one of the wealthiest and most powerful men the world has ever known through good will. Don’t get me wrong, he had as much right as everyone does to make as much profit as he wants, but don’t tell me he gamed the system to help the little guy and do it with a straight face.
The article continues:
“What reforms followed the 1907 panic? Most importantly, it led to the founding of the U.S. Federal Reserve System. The act was passed in December of 1912, and is arguably the high water mark of the Progressive era.”
Here they finally show their bias, making fallacious arguments to support the creation of The Fed, which they basically admitted at the beginning has made panics of “higher complexity, faster speed and greater scale”. And I thought the Smithsonian was exclusively a factual and historical organization.
MrLiberty
January 1, 2018 3:42 pm
Ron Paul had one of the better suggestions. He proposed simply abolishing all taxes on gold/silver/platinum/precious metals, abolishing all legal tender laws (the laws that FORCE us to use federal reserve notes as currency) and allowing ALL currencies to circulate freely and be used for debts and contracts. Personally I would add abolishing the fraudulent scam of fractional reserve banking. Allow other currencies to circulate freely and the federal reserve note will be driven from the market according to Gresham’s law. That would at least provide a transitional mechanism that would probably be superior to simply shuttering the Fed. While this would be a transitional means, everyone responsible for their crimes over the century should still be put on trial, all of their assets seized, and all current debt to the Fed should simply be nullified.
And in NO case should anything more than certifying weights/measures/purity of precious metal coins, etc. be entrusted to the Congress. Handing over the criminal manipulation of the money supply and interest rates to the Congress would absolutely be the wrong thing. The free market can easily address the cost of money just like it handles the cost of everything else (that is allowed to still be “free”).
i forget
January 1, 2018 8:01 pm
When someone removes a cancer, what do you replace it with?
Currently, if the price of admission is survived, the replacement is called remission.
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Ending the Fed is not a panacea. Events like the financial panic of 1907 made the Fed bill popular (the press at the time dubbed it the “bank bill”). During the panic, cash was in such short supply, merchants had to sign promissary notes agreeing to pay greater than face value just to get enough cash to transact business. These were not loans; these agreements were just to obtain cash on hand. There was no mechanism, like the Fed, to increase the money supply.
https://www.smithsonianmag.com/history/the-financial-panic-of-1907-running-from-history-82176328/
Of course it’s not a panacea, there is no such thing. Never has been and never will be, at least of human origin anyway. If you read G. Edward Griffin’s “The Creature from Jekyll Island”, he lays out the reasons behind and the proper solutions to many of the financial panics and bank runs in U.S. History.
Before the creation of the Federal Reserve, most of the panics were very short term and only ended up in the liquidation of a few smaller banks or other institutions who were much too careless with their financials. Yes, it affected average citizens when a corrupt bank failed, but the results were short term and not widespread. The Federal Reserve ended these common, albeit small, panics and replaced them with a “managed” economy. Now, the masters of The Fed manipulate the system on a long term basis so instead of multiple small panics which are fairly easy to deal with, you get huge disruptions like The Great Depression that go on for years and affect everyone in the country and sometimes beyond.
You will always have pain and suffering when it comes to the management of money, because some people deal honestly while others steal. The Fed just institutionalizes that theft and makes it impossible for the average citizen to do anything about it. It’s easy to avoid a corrupt bank or two, it’s impossible to avoid a corrupt managed economy.
Also, to your argument about merchants signing promissary notes during a panic. You claim that these were “not loans” because it was “just to obtain cash on hand”. A promissary note is, by definition, a loan, it doesn’t matter what the loan is for. They borrowed something and promised to pay it back, usually plus interest. That’s a loan. You would rather a business didn’t get a loan of actual money for operating funds from some small trustworthy bank, but instead had The Fed create fiat money out of thin air and then loan it to a FDIC bank, who then loans it to you? So not only do you pay interest to the FDIC bank on the fake money they loaned you, you also pay the other “tax” created by fiat money which is inflation?
“not loans”
During the panic of 1907 it was like this, you’re a business owner and you have money in the bank. You go to the bank to make a withdraw of cash to conduct your business, and the bank tells you “we can give you a check or a draft but we can’t give you cash because we don’t have any on hand”. That’s when some entrepreneur approaches with an offer, “I have cash, but you agree to pay me back 110% when cash again becomes available”. I agree it functions like a loan, but the difference is the business owner has money in the bank, he just can’t access it in cash form. The cash supply had died up.
After reading that Smithsonian article, I just can’t help myself. The article states:
“What are the differences between the panic of 1907 and the crisis of 2008? Three factors stand out: higher complexity, faster speed and greater scale.”
Going back to what I said in my first reply, the 2008 panic was of “greater scale”. Of course it was, because the economy has been manipulated by the Federal Reserve. Thanks for making my point for me Smithsonian, although it’s pretty pathetic to admit this then endorse the creation of The Fed.
The article later says:
“What did Morgan do to stop the panic? You quell panics by organizing collective action to rescue institutions and generally convey confidence back into the market.”
No, no, no, no, no and fuck no. You quell panics by letting the dishonest institutions go out of business. Sure, they are going to take their depositors money with them, but maybe those people will learn to deal with an honest bank next time. People are not suddenly absolved of all responsibility just because they claim, “but my bank told me…”. You stick a fork in a power socket, you get shocked. You put your money in an insolvent bank, you lose your money. Too big to fail anyone?
The paragraph titled “Was Morgan practicing a kind of ‘profitable patriotism’?” is particularly egregious. Yup, good ‘ole J.P. manipulated the system out of sheer altruism. He became one of the wealthiest and most powerful men the world has ever known through good will. Don’t get me wrong, he had as much right as everyone does to make as much profit as he wants, but don’t tell me he gamed the system to help the little guy and do it with a straight face.
The article continues:
“What reforms followed the 1907 panic? Most importantly, it led to the founding of the U.S. Federal Reserve System. The act was passed in December of 1912, and is arguably the high water mark of the Progressive era.”
Here they finally show their bias, making fallacious arguments to support the creation of The Fed, which they basically admitted at the beginning has made panics of “higher complexity, faster speed and greater scale”. And I thought the Smithsonian was exclusively a factual and historical organization.
Ron Paul had one of the better suggestions. He proposed simply abolishing all taxes on gold/silver/platinum/precious metals, abolishing all legal tender laws (the laws that FORCE us to use federal reserve notes as currency) and allowing ALL currencies to circulate freely and be used for debts and contracts. Personally I would add abolishing the fraudulent scam of fractional reserve banking. Allow other currencies to circulate freely and the federal reserve note will be driven from the market according to Gresham’s law. That would at least provide a transitional mechanism that would probably be superior to simply shuttering the Fed. While this would be a transitional means, everyone responsible for their crimes over the century should still be put on trial, all of their assets seized, and all current debt to the Fed should simply be nullified.
And in NO case should anything more than certifying weights/measures/purity of precious metal coins, etc. be entrusted to the Congress. Handing over the criminal manipulation of the money supply and interest rates to the Congress would absolutely be the wrong thing. The free market can easily address the cost of money just like it handles the cost of everything else (that is allowed to still be “free”).
When someone removes a cancer, what do you replace it with?
Currently, if the price of admission is survived, the replacement is called remission.