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Source link: http://archive.mises.org/8921/end-the-central-bank/

End the Central Bank

November 10, 2008 by

For now, what interests people is the Austrian account of the bust. And the Austrian account is the only compelling one in circulation. In fact, as compared with the past, parts of the Misesian-Rothbardian view of the cycle have fully entered the mainstream, with just about everyone agreeing that the current bust originated in a bubble fueled by easy money. That is a message that our forbearers never entirely made stick. FULL ARTICLE


Michael A. Clem November 10, 2008 at 8:28 am

Good article! But I wonder how many people are really reading?

fundamentalist November 10, 2008 at 8:51 am

“Economic science teaches timeless truths.”

Yes, but sometimes people don’t want to hear the truth. They want their fantasies restored and reinforced. The fact that many people are ready to see the fault of the Feds in this depression doesn’t mean they’re ready to disband it. They simply want the Feds to do a better job in the future. Recall that the media built up Greenspan into a god in the 90′s and they’re not ready to give up on that idolatry. They simply have recognized that their god had flaws, like the Greek gods on Olympus. Killing the Fed would be tantamount to killing the public’s worship of all governmental power and that ain’t about to happen. People want their gods to behave better, not disappear.

Warning: Non-religious people should skip this next paragraph.

Remember what it took to cure Israel of its idolatry in the Old Testament. God sent the Babylonians to conquer Israel, kill most of its population and export the survivors to Babylon, and destroy Jerusalem and the temple. Nothing else had worked. I would imagine that something far more drastic than the current mild downturn will be necessary to cure the present idolatry. Europeans worshipped the state, too, during the Protestant Reformation and it took the state murdering tens of thousands of Protestants before they would revolt. Idolatry runs deep in the human soul.

Donktastic November 10, 2008 at 10:50 am

People may want their gods to behave better instead of disappearing, however, pretty soon they’re going to wake up and realize their so-called gods like Greenspan, Bernanke, and Paulson are crooks. We need to educate these people that it’s not the President who runs the country it’s the central bank. Think about it…who controls the money supply?

Like Mayer Rothschild said, “Give me control of a nation’s money supply, and I care not who makes its laws.”

The federal reserve needs to be abolished!

William Rader November 10, 2008 at 11:17 am

I was wondering if anyone here can direct me to a source on the Mises.org site where there is a good discussion of the capital gains tax? I’m afraid that the Obama Advisory Group will advise the president-elect to raise the capital gains tax from its current rate of 15% to 25% or even 26% or more. If this legislation comes before the House, I am going to write members of the House Financial Services Committee, and I want to cite sources that support my argument.

Also, has anyone heard anything yet about raising the minimum wage? Hazlitt presents a good argument against the minimum wage. This may require a separate letter to the HFSC.

William Rader November 10, 2008 at 11:26 am

“If a lion could talk, we could not understand him.”-Ludwig Wittgenstein

If a cogent argument for ending the Fed were presented to the Obama Advisory Group, they would not understand it.

Enjoy Every Sandwich November 10, 2008 at 11:37 am

William Rader,
I recall from a recent interview of Obama (sorry I don’t remember where, most likely CNN) that he said he wanted to raise the capital gains rate from 15% to 20%. He referred to this as a “modest” increase (aware, no doubt, that most graduates of our “education” system cannot handle basic arithmetic).

In today’s Washingon Post, there is an article (“Aide: Middle-Class Tax Cut a Priority”) that mentions the minimum wage. “Saying Obama’s decisive election victory amounts to a mandate, many of the president-elect’s staunchest supporters, including labor leaders, are looking for strong, swift action on many of the sweeping proposals–including reforming health care and increasing the minimum wage and indexing it to inflation–that he pushed on the campaign trail.”

So I would say that your concerns are justified.

Glen November 10, 2008 at 4:54 pm


When is that going to happen? I’ve talked to many people who seem to think Obama’s ideas are new. Most of them are just warmed-over Demipub policies of the past (maybe served with a little pizazz kind of like mom did when she served us leftovers). These people feel that the slide over the last 8 years is just because the ‘wrong people’ were in charge (and though they agree that coercion is wrong, don’t seem to realize that these ‘wrong people’ could be back in charge in as little as 2-4 years!). We’ve seen the blame for the last big depression being falsely but successfully placed at the foot of the free-market. I see no reason that blame cannot still be shifted. Even those who know the problem must realize there is a good chance that there going to screwed if the general population realizes the king is naked.

Friedrich November 11, 2008 at 3:21 am

Well you can bet who they will make responsible. Because they need scapegoats they will surely blame “neoliberalism” for it or maybe liberalism or something like that. They will say liberals are for “gains for in privacy, losses for “all”"

And AFAIKT Greenspan has said “they had no choice, but to make money cheap”. Sorry, can’t find where I’ve read that.

Mike Sproul November 11, 2008 at 11:34 am


You say you favor free banking. Does this extend to fractional reserve banking? Do you believe that the expansion of the money supply that results from fractional reserve banking is inflationary? Or do you believe that as long as a bank’s assets are sufficient to buy back the money it has issued, it will not cause inflation? These questions have cause no small amount of argument on this blog.

Kurt November 11, 2008 at 2:39 pm

That the majority of the European population are worshippers of the state is an astute observation by ‘fundamentalist’, but is hardly surprising given the growing power and influence the EU commission, parliament, ECHR, ECB and other institutions. Even in my native country of Britain – now rapidly descending into an economic basket case along similar lines of what happened in the mid-late seventies – the quaint English notion of parliamentary sovereignty (originally conceived as counter-balance to the power of the monarch) has practically disappeared and in its place has evolved total government supremacy. Probably the largest projection of that power is the Bank of England (BoE). Therefore, should the Fed ever be abolished, I just hope the BoE will quickly follow it into extinction.

Colin Green November 11, 2008 at 5:43 pm

Factional Reserve is impossible to stop, so why argue about it?
If you were to open a Metal Depository, and I put my gold and other precious metals in your store for safekeeping, and you lived off the rent, and you were honest and did not invent fractional reserve, how could you stop me doing so?
I could issue notes to friends promising them a share in ‘my’ metals, and if I had a reputation for honesty, and started out by scrupulously honouring the notes, then I would be in a position to make more promises than I could keep, so long as people accepted the notes instead of the metals. I would have turned into a banker, and you would be my central bank.
Not everyone will be a saint, so this would happen, so why argue about if it will happen?

newson November 11, 2008 at 5:44 pm

to mike sproul:

“free banking” means that money is to be treated in the same legal way as every other warehoused commodity in a depository.
arguing the contrary case, you must be able to justify why money is not like any other good.

that said, i’m interested to hear mr rockwell’s views, too.

newson November 11, 2008 at 5:53 pm

to colin green:

robbery and rape will always occur, so why bother with a police force?

Arend November 11, 2008 at 6:29 pm

People who have difficulty pointing out the evils of central banking, or more specifically inflation, can point out that the story twist of Prison Break in the fourth season is actually based on sound economic theory (as far as I could check): evil corporation with its tentacles in all layers of society (and government – as for us nitpickers that isn’t inherently part of society of course) gains more and more power in causing financial unrest by printing up foreign (for now) currencies.

It is actually pretty remarkable how some of the best television series of recent years (watch out, subjective opinion): Heroes, Prison Break, and Jericho have some very noticable fear-your-government-and-corporatist-entities elements. The woman president of Prison Break Seasons 1 and 2 actually kept on remnding me of Hillary Clinton (for some strange reason <– political correct statement alert).

My point, easy accessible popular culture has some examples to point out the legitimacy of Austrian/sound economic theory and libertarianism.

Colin Green November 11, 2008 at 8:36 pm

Newson, you have grabbed the wrong end of the stick.
My point was not that we could stop such behaviour- but that there will always be factional reserve banking with us. What do we do about it? Should it be a crime?
If it is such a popular crime, should the government do anything?
Exactly like the drugs trade, I think that prohibition would fail.
And if we don’t prohibit it, what should we do about it? Your example of rape is wrong- there is a victim who wants justice. Who is the victim in FR, if we all know about it, and collude in it?

Stanley Pinchak November 11, 2008 at 8:57 pm

Colin Green,
Your post implies a tragedy of the commons. All cases of tragedy of the commons result from a lack of or poorly defined property rights. Walter Block recently posted an email exchange on the problem of rights with regards to fractional reserve banking. People would be more willing to assert their rights with regards to demand deposit if they were more cognizant of the nature of their contract with a 100 percent reserve bank, and of how fractional reserve banking leads to a business cycle. As they say ignorance is bliss (at least for the bankers, who laugh all the way to the bank).

Peter November 11, 2008 at 10:16 pm

Mike Sproul says: You say you favor free banking. Does this extend to fractional reserve banking?
“You say you favor freedom. Does this extend to murder?”

Do you believe that the expansion of the money supply that results from fractional reserve banking is inflationary? Or do you believe that as long as a bank’s assets are sufficient to buy back the money it has issued, it will not cause inflation? These questions have cause no small amount of argument on this blog.
The only one arguing is you. Of course fractional reserve money-supply inflation is inflationary. RBD is crankish nonsense.

Colin Green November 11, 2008 at 11:14 pm

Do you lot call yourselves Austrian Libertarians?
If there is no monopolistic Central Bank, then factional reserve is morally neutral, since clients can leave for any bank of their own tastes!
If all these banks will compete in the future, and we all have metal-backed currencies, I think factional banking would still develop. What would be wrong with competing factional reserve banks? If you want non-factional banking, you could start one up on your own, and we’ll see if you can survive, and if you thrive, we might join you!

newson November 12, 2008 at 9:07 am

to colin green:
the fraud of frb is essentially twofold. first towards those who naively call themselves “depositors” (unaware that in a frb system they are actually “creditors” to the bank; the language is twisted to conceal the sleight of hand). second, towards those who must unwittingly endure the business cycle, a by-product of frb. generally the poor, as the wealthier are perfectly capable of becoming asset-traders.

why is fraudulent warehousing of grain is subject to criminal sanction, and yet money not? do you maintain that money is something other than a good, and if yes, what is your justification?

those, like mises, who argue along utilitarian lines (ie admit that it’s a con, but that competitive redemptions would limit money creation) are unable to provide historical examples where this process has actually worked. all the cases i’ve seen have the bankers successfully coopting the politicians to suspend redemption during the bust, and share the spoils during the boom.

StatusQuoJoe November 12, 2008 at 5:52 pm

To those who question whether or not fractional reserve banking is a necessity or if our economy could work without it, I suggest that the best “regulation” of banking is the free market. Allow bad businesses to fail, unfortunately people will loose money but overall it is the best for the macro-economy. True free market forces are the BEST safeguard against fraud. Look at the financial sector today, there is so much fraud through the derivatives markets no one knows how big the losses are. Derivatives are
(fiat money)^2

Colin Green November 12, 2008 at 10:59 pm

Yeah! What he said!
My offer still stands- if you don’t like factional reserve, then start your own version of a bank! Let us see if your ideas would work in the real world!

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