The Federal Reserve & Fractional Reserve Banking Is A Fraud

[LoudAnimalAttack]

I started this thread because I think the Federal Reserve, along with fractional reserve banking are the real causes of our current economic troubles - along with fiat money in general.

I think it is time for people to begin to question the Fed. A month back or so, Alan Greenspan testified before Congress that he was clueless as to the problem and had no idea it could happen. Does anyone actually believe that? Roughly 25 years ago, Greenspan wrote several essays on the Gold Standard, and how only gold was credible money - and that fiat money was doomed to fail.

The US Constitution states that all money is to be coined - either gold or silver. No fiat money, the founders had their own experiences with fiat money and massive inflation. They also got rid of their short-lived central bank. Ever heard the phrase: "Not worth a Continental". The Continental fiat dollar experienced extreme inflation, and became near worthless.

For those just beginning to study or look into this topic, thanks to Ron Paul, here's some helpful information. These are the best sources of information of the Federal Reserve, fractional reserve banking, and fiat money in general:

1) Watch the documentary "Fiat Empire". Its free online. Google it.
2) Read the book "The Creature From Jekyll Island: A Second Look At the Federal Reserve" by G. Edward Griffin. This book is the authority on the subject.
3) Go to youtube and watch some video interviews of: Peter Schiff, Jim Rogers, and Marc Faber.
4) Go to the Ludwig von Mises Institute's website: mises.org

The Austrian school of economics is the only true free market, capitalist form of economics. Its most influential writers include Ludwig von Mises and Murray Rothbard. Any of their books are excellent.

[coolhead]

I started this thread because I think the Federal Reserve, along with fractional reserve banking are the real causes of our current economic troubles - along with fiat money in general.

I think it is time for people to begin to question the Fed. A month back or so, Alan Greenspan testified before Congress that he was clueless as to the problem and had no idea it could happen. Does anyone actually believe that? Roughly 25 years ago, Greenspan wrote several essays on the Gold Standard, and how only gold was credible money - and that fiat money was doomed to fail.

The US Constitution states that all money is to be coined - either gold or silver. No fiat money, the founders had their own experiences with fiat money and massive inflation. They also got rid of their short-lived central bank. Ever heard the phrase: "Not worth a Continental". The Continental fiat dollar experienced extreme inflation, and became near worthless.

For those just beginning to study or look into this topic, thanks to Ron Paul, here's some helpful information. These are the best sources of information of the Federal Reserve, fractional reserve banking, and fiat money in general:

1) Watch the documentary "Fiat Empire". Its free online. Google it.
2) Read the book "The Creature From Jekyll Island: A Second Look At the Federal Reserve" by G. Edward Griffin. This book is the authority on the subject.
3) Go to youtube and watch some video interviews of: Peter Schiff, Jim Rogers, and Marc Faber.
4) Go to the Ludwig von Mises Institute's website: mises.org

The Austrian school of economics is the only true free market, capitalist form of economics. Its most influential writers include Ludwig von Mises and Murray Rothbard. Any of their books are excellent.

I would bet that most people don't even realize that the banks own the fed. I think they would find it interesting to see who owns the fed and who gets bailed out.

[ChrisSpencer]

Austrian school is good, but you don't have to lump into Austrian school the notion that the free market and fiat currency are mutually exclusive. I am a big fiat money advocate, as are MOST economists IMO. Coming back from an economic forecasting conference in Atlanta last week I remember the question of a metalic standard coming up in a few side conversations and each reaction was pretty negative. In the modern global economy you cannot have a functional open market with a metal backed currency.

The Fiat regime is not inherently inadequate, it is simply temporarily broken. What you need to fix this is stricter monetary policy requirements on the central bank, not to overhaul the system itself.

[peter45]

The big problem I have always had understanding the gold standard is that I don’t see how the supply of the metal is supposed to match the population expansion.

And, even if sufficient quantities of gold were to be available, how would the government pay the gold suppliers?
If the government gave the miners gold certificates, what would be the value backing the certificates? If nothing of value was exchanged, meaning the miners received paper for metal, wouldn’t that be the same as just printing money?

[ChrisSpencer]

The big problem I have always had understanding the gold standard is that I don’t see how the supply of the metal is supposed to match the population expansion.

And, even if sufficient quantities of gold were to be available, how would the government pay the gold suppliers?
If the government gave the miners gold certificates, what would be the value backing the certificates? If nothing of value was exchanged, meaning the miners received paper for metal, wouldn’t that be the same as just printing money?

The biggest problem is the fluctuating demand for gold in the private sector. Centuries ago there weren't microchip companies that used tons of gold to produce their circuit boards. There weren't insulators that used gold in their wiring. Gold is a commercial product, backing your currency on something like that puts a real risk premium for uncertainty into your monetary policy.

Furthermore a country on a metalic standard forfeits their monetary sovereignty and that's why it would never work. What's good for East Asian monetary policy is not necessarily good for Western European monetary policy at the same moment. Global monetary policy requires the dynamic element of a fiat regime.

[peter45]

The biggest problem is the fluctuating demand for gold in the private sector. Centuries ago there weren't microchip companies that used tons of gold to produce their circuit boards. There weren't insulators that used gold in their wiring. Gold is a commercial product, backing your currency on something like that puts a real risk premium for uncertainty into your monetary policy.

Furthermore a country on a metalic standard forfeits their monetary sovereignty and that's why it would never work. What's good for East Asian monetary policy is not necessarily good for Western European monetary policy at the same moment. Global monetary policy requires the dynamic element of a fiat regime.


I agree completely on the issue of market value.
Many years ago when there was a gold standard, there wasn’t an electronics industry.
I always felt that the timing of the demise of the gold standard, and the rise of the electronics industry was more than coincidence.

But I still have a problem with the physical constraints of acquiring the metal, and the expanding economy,
Plus
The compensation of the miners for the metal.

In the olden days, the government could sell land to raise money. That was value for value.
But how could the government compensate the metal producers now?

[Free Market Capitalist]

Hogwash, the gold standard is much better then fiat. Gold does "keep up " with population growth to some degree, because new gold is always extracted out of the earth, around 3% a year, so there is always less then 3% inflation should demand for gold stay the same.

Sure demand fluctuates, but that's true for fiat currencies and treasuries as well. Perhaps ideally, a fiat currency backed by a basket of commodities would be best. But the gold standard is a million times times better then fiat based on the future earnings of tax payers and their ability to pay back that debt.

Alan Greenspan is an interesting character. I really believe he had no idea what was coming. He was a big free market libertarian gold standard type of guy, even hung out with Ayn Rand in his youth. But the power went to his head after being the fed chief for so many years, and he really believed there were some matters the government had to intervene into. Sort of like Bush, I think Alan's heart was always in the right place but his ego got the best of him. That's exactly why you need a gold standard, men and their ego's, their ideology, their shifting policy, etc have no play into how our monetary base is structured, and that's really the stability we need.

[Free Market Capitalist]

PS - I'm in the jewelry industry. BY FAR we consume MUCH MORE GOLD then the electronics industry. Always have.

Gold's main consumption are (1) Jewelry, (2) Investment, (3) Industrial (electronics, etc), in that order.

Platinum, Silver and Palladium are all primarily used for Industrial purposes first. Silver was used a lot for developing film, but with digital cameras that industry is almost non-existant. Platinum and Palladium are primarily used in the construction of catalytic converters and other emissions devices.

[peter45]

Hogwash, the gold standard is much better then fiat. Gold does "keep up " with population growth to some degree, because new gold is always extracted out of the earth, around 3% a year, so there is always less then 3% inflation should demand for gold stay the same.

Sure demand fluctuates, but that's true for fiat currencies and treasuries as well. Perhaps ideally, a fiat currency backed by a basket of commodities would be best. But the gold standard is a million times times better then fiat based on the future earnings of tax payers and their ability to pay back that debt.

Alan Greenspan is an interesting character. I really believe he had no idea what was coming. He was a big free market libertarian gold standard type of guy, even hung out with Ayn Rand in his youth. But the power went to his head after being the fed chief for so many years, and he really believed there were some matters the government had to intervene into. Sort of like Bush, I think Alan's heart was always in the right place but his ego got the best of him. That's exactly why you need a gold standard, men and their ego's, their ideology, their shifting policy, etc have no play into how our monetary base is structured, and that's really the stability we need.



Maybe the comment would have been better stated; How would we GET BACK to a gold standard?

What would miners accept for their gold?

If the intention is to have gold backing the money in circulation, just what are the miners supposed to take for their gold? Money that is in circulation? So, how is that money in circulation supposed to become the government's money?

The government could never go back to a gold standard unless it retired ALL of its debt, and had something of value to sell in return for gold.

Attempting to buy gold with fiat money to achieve a gold standard is silly.

[7426k]

Can we stop lumping in fractional reserve banking with the Fed? Fractional Reserve banking existed long before the Fed.

[jblovetere]

It is time to call for accountability of the Federal Reserve! They are refusing to name those that they gave 1 trillion in loans to. What is that?

Join the Audit the Fed Facebook page. Support HR 1207.

www.tinyurl.com/AuditTheFed

[Safiel]

Can we stop lumping in fractional reserve banking with the Fed? Fractional Reserve banking existed long before the Fed.

While they are indeed different concepts, they are also inherently related. Central banking assumes a fractional reserve banking system. Central banking would be pointless in a 100% reserve system, since it exists primarily to coordinate inflation, something that does not exist in a 100% world. Of course, fractional reserve can exist without a central banking, in the form of free banking. While inferior to 100% reserve banking, free banking is much superior to central banking systems, since banks that over inflate will be liquidated in any resulting panic, a fact which reigns in inflation.

[7426k]

While they are indeed different concepts, they are also inherently related. Central banking assumes a fractional reserve banking system.

Every banking system in the history of the world assumed a fractional reserve system, either overtly or through fraud.

Of course, fractional reserve can exist without a central banking, in the form of free banking. While inferior to 100% reserve banking, free banking is much superior to central banking systems, since banks that over inflate will be liquidated in any resulting panic, a fact which reigns in inflation.

I'd love to see an attempt at free banking.....in someone else's state;) In an age when currencies are convertible so easily and information is so readily available worldwide (and therefore the previous problems are less apt to occur) it might work.

[LoudAnimalAttack]

Can we stop lumping in fractional reserve banking with the Fed? Fractional Reserve banking existed long before the Fed.

Yes, you are correct, and I agree. The only reason why I did lump the to together is because both are critically important, and both need to be gone.

However, the Fed probably wouldn't be needed if fractional reserve banking was gone - at least not as needed. The two do carry some connections.

[LoudAnimalAttack]

Hogwash, the gold standard is much better then fiat. Gold does "keep up " with population growth to some degree, because new gold is always extracted out of the earth, around 3% a year, so there is always less then 3% inflation should demand for gold stay the same.

Sure demand fluctuates, but that's true for fiat currencies and treasuries as well. Perhaps ideally, a fiat currency backed by a basket of commodities would be best. But the gold standard is a million times times better then fiat based on the future earnings of tax payers and their ability to pay back that debt.

Alan Greenspan is an interesting character. I really believe he had no idea what was coming. He was a big free market libertarian gold standard type of guy, even hung out with Ayn Rand in his youth. But the power went to his head after being the fed chief for so many years, and he really believed there were some matters the government had to intervene into. Sort of like Bush, I think Alan's heart was always in the right place but his ego got the best of him. That's exactly why you need a gold standard, men and their ego's, their ideology, their shifting policy, etc have no play into how our monetary base is structured, and that's really the stability we need.

Also, don't forget that the gold standard would reward savers, whereas fiat money hurts savers.

Under the gold standard, or most commodity backed currencies, if the population did grow faster than what the newly extracted gold amounts, people who saved money would be rewarded as their gold would actually gain purchasing power. Under the inflationary fiat system, savings are eroded.

The key for everyone to understand is the role of savings in economics, and the Austrians understand the importance of savings to fund investments and such, the Keynesians hate savings.

Also, I found the link to the video clip that I was talking about. Even self-admitted socialist Sen. Bernie Sanders I-VT is starting to lose his patience with the Fed. Check out this short 3 minute clip of him giving Fed Chairman Ben Bernanke a beatdown:
http://www.youtube.com/watch?v=kUJIG3JNPk0&eurl=http://www.campaignforliberty.com/index.php?blogpage=2

Nice.