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Asking the Wrong Questions About the Federal Reserve John F. McManus On December 11, the Federal Reserve cut both the short-term interest rate and the discount rate by a quarter percentage point. Immediately, questions were raised about whether the cut should have been greater. But if you ask the wrong questions, you’ll never get the right answer about America’s economic travails. Follow this link to the original source: "Credit Crisis Prompts Fed to Roll Back Rates Again" Ever since its creation in 1913, the Federal Reserve has had a chokehold on the economic life of the United States. And, as is evident by the reaction to Fed moves worldwide, decisions made by this private non-governmental institution impact the rest of the world. In our country, economists and commentators immediately questioned the size of the Fed’s cuts. To say "wrong question" to these gurus is to hope that some of them will begin to understand that the very creation of the Federal Reserve is the problem, not how its officials manipulate interest rates. The basic error regarding the Fed is the idea that money has to be managed. But honest money, by definition a medium of exchange that stimulates commerce, has always been a commodity whose value is determined by the marketplace. The accumulated wisdom of mankind has determined that the best commodity to use as money is gold. It possesses divisibility, durability, transportability, and relative scarcity. It is also desired by all. Its value cannot be weakened by flooding the marketplace with its various forms: jewelry, ingots, coins, etc. And if paper certificates honestly certifying a store of gold come into use, commerce flourishes even more.
Federal Reserve notes now constitute America’s money. There is no precious metal backing them up. The amount of these notes in circulation is determined by decisions arrived at by a combination of Federal Reserve and U.S. government powerbrokers. They can increase the amount at whim thereby lowering the value of all such notes. Or they can decrease the amount and cause additional problems. The public is at their mercy. The questions that should be asked today include: How is it that the U.S. dollar, once backed by gold and considered "good as gold" worldwide has seen its value undermined so that it is now worth less than five cents compared to 60 years ago? Also, where in the U.S. Constitution is there any authorization for anyone to manage the money, or to turn this management over to a private entity? The Constitution authorizes Congress "to coin money," not to establish a bank and not to give power to a private money-managing entity. The power to coin money simply meant creating a mint to shape precious metals into coinage of a standard size, weight and purity so that commerce would flourish. That’s all! In the famous Communist Manifesto authored by Karl Marx 160 years ago, one of the steps he urged as the path to seize control of a nation reads, "Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly." That’s the Federal Reserve. Questioning the wisdom of the Fed’s action in lowering or raising interest rates, or how much currency the Fed should create or destroy, plays into the hands of those who are already running the dollar. The question that should be discussed is, "How soon can the Fed be abolished so that real money backed by something of value can again become America’s medium for exchange?"
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