Continuing in the fight for a 100% reserve banking system (or at least a system closer to that than the one we have), I just sent the following message to the Board of Governors.
Naturally, feel free to copy-paste, or send them your own comments here.
To the Board of Governors: As you know, recent PPI data shows a marked increase in Final Goods prices – and generally CPI follows PPI somewhat closely. With this increase in prices it is imperative that we prevent further increases in the broader money supply while at the same time maintaining the integrity of the financial system.
To that end, I recommend that the Board consider a substantial increase in the reserve requirement ratio. Such a move will prevent the historically enormous monetary base from leading to increases in the broader monetary aggregates. Also, it will encourage banks to continue to hold a large quantity of excess reserves which will keep their balance sheets relatively strong in this unsteady time.
As a final point, I would like to remind the Board that focusing on interest rates in a time when very high inflation threatens, and the government has adopted a policy of large deficits is a bad idea. A focus on keeping interest rates low in this fiscal environment is essentially equivalent to handing monetary authority to the federal government, which has historically been the recipe for starting high inflation and/or hyperinflation. Though allowing interest rates to rise may be temporarily painful, the early 1980s shows that the sacrifice necessary to stop or prevent inflation is generally far smaller than many estimate. When given the choice between stagflation with a risk of hyperinflation or an inflation-fighting recession, the latter is most certainly better for the economy in the long run, and the short run costs are just that – short.
No response necessary.
Sincerely,
Lucas M. Engelhardt, ABD
PhD Candidate and GTA
Department of Economics
The Ohio State University
{ 18 comments }
Here’s mine. Less learned, but I liked it.
Hi,
I know you’ve all got a lot of stuff on your plates right now, but I’d really like a future that doesn’t involve hyperinflation (and the complete collapse or our financial system). The way you’ve pumped money into the system recently sure makes this seem inevitable. And things are scary enough right now.
Perhaps raising the reserve requirement would be a good step?
I don’t know. I’m not an expert. Please do the best you can.
Thanks,
Patrick
I like the enthusiasm; however, the Feds scoff Congress and everyone else.
Do you think that imaginary Money is created from the amount of total Debt generated? Now, that’s a Fractional Banking System and if I was a creative Oligarch, that’s what I would do.
You’ve got to think on an EVIL and GREED level comparable with those in Charge to understand the motivation, but have NO compassion and SOUL
Here’s mine. Less learned, but I liked it.
Hi,
I know you’ve all got a lot of stuff on your plates right now, but I’d really like a future that doesn’t involve hyperinflation (and the complete collapse or our financial system). The way you’ve pumped money into the system recently sure makes this seem inevitable. And things are scary enough right now.
Perhaps raising the reserve requirement would be a good step?
I don’t know. I’m not an expert. Please do the best you can.
Thanks,
Patrick
Dear Board of Governors,
The very existence of the Fed is a moral disgrace of epic proportions. It does not matter what motivates the institution, be it belief in scientific management, the perceived necessities of defence, or charity even. The truth is that the Fed instigates booms and busts (suffered since its inception), lives by ‘robbing Peter to pay Paul’, and violates the once cherished principles of life, liberty and property.
With these undeniable truths in mind, I demand that you liquidate the Fed and return money, its creation and management, to the people. It is the only just option you have.
Failure to comply will be met with proportionate force. That said, it is my sincere wish that no violence comes of this. I shall advocate monetary secession primarily.
The ball is in your court.
Sincerely,
xxxxx
“I just sent the following message to the Board of Governors.”
You lost your time, the message will be intercepted by the spam filter and tossed in the recycle bin where it will get deleted without ever being read.
If you had jumped on one foot while turning around and chanting a stupid song, it would have been a more productive use of your time, you would at least have burned calories and cholesterol.
Reason,
“lives by ‘robbing Peter to pay Paul’”
Rather, lives by robbing Peter to better rob Paul.
This morning’s announcement about continued inflation targeting suggests that the Fed’s role in this mess will again escape scrutiny. How long can this persist? Likewise, amidst all the rhetoric about greedy bankers, the rating agencies have flown under the radar despite their central position in all this.
Dear Board Of Governors…
Your last earthly meal is on me, order whatever you want, all you can eat.
Thanks Goose:
Dear Board of Governors,
The very existence of the Fed is a moral disgrace of epic proportions. It does not matter what motivates the institution, be it belief in scientific management, the perceived necessities of defence, or charity even. The truth is that the Fed instigates booms and busts (suffered since its inception), lives by ‘robbing Peter to better rob Paul’, and violates the once cherished principles of life, liberty and property.
With these undeniable truths in mind, I demand that you liquidate the Fed and return money, its creation and management, to the people. It is the only just option you have.
Failure to comply will be met with proportionate force. That said, it is my sincere wish that no violence comes of this. I shall advocate monetary secession primarily.
The ball is in your court.
Sincerely,
xxxxx
Goose:
Actually, I write letters to politicians on a somewhat regular basis. My primary goal is ever and always my own amusement when I do that, and it succeeds at providing that, even if it doesn’t result in a change in policy.
Dear Board of Governors,
Stop counterfeiting. Clear out your offices and find real jobs doing something productive.
Yours truly,
The Fed (“We control inflation and print money”) are the good cop in the good cop/bad cop scheme run by congress.
Congress threatens to spend/print too much and the Fed is the restraining influence (and does the direct printing).
Congress created the Fed and if enough of Congress agreed they could uncreate them. However, for now, Congress is too interested in spending money they don’t have and will do anything to avoid having to end their spending.
So “killing the Fed” won’t help (and anyway isn’t likely until the dollar is dead).
Dear Professor Engelhardt,
While I sympathize with the motive behind your letter, it seems that you are far too charitable in interpreting the intentions of your audience. If we assume that the Fed is genuinely interested in the good of the economy as a whole, then it is just a matter of persuasing the Fed as to the most effective means to that end. In that case, it makes sense to write letters such as yours. However, given the history of the Federal Reserve, and the immense transfer of wealth that it facilitates to the political-financial elites who benefit from it, your underlying assumption of good intentions seems dubious at best.
It is a wonderful thing to be armed with the causal-realist approach of the Austrian school and the insights Menger, Bohm-Bawerk, Mises, Hayek, and Rothbard. But in using this knowledge, one also must remain cognizant of the subjective values of one’s audience. For example, it makes no sense to advance the Misesian case against socialism to a totalitarian who values his own power over the well being of his subjects. Likewise, it makes no sense to try to persuade the Fed of the validity of the Austrian Business Cycle Theory if the interests behind central banking are diametrically opposed to the interests of the people.
As Lord Acton wrote, “the issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” Instead of wasting our time flattering the Board of Governors by pretending that they are good people who are just a bit misguided, we should instead focus our efforts on winning over the PEOPLE, in whose interest it is to see justice (not to mention economic sanity) done.
If, after carefully studying the history of the Federal Reserve (and central banking in general), you still feel the need to write something to the Fed, I think a far more apt letter would read:
To the Board of Governors:
“You are a den of vipers and thieves.
I intend to rout you out, and by the Eternal God, I will rout you out.” — Andrew Jackson
Very Truly Yours,
Mike:
Actually, when I write letters such as these (I also regularly write my Congressmen and the President), the prime motive is actually my own amusement. I enjoy writing these kinds of letters.
Also, I’m one of the more optimistic libertarians – tending to see government bureaucrats and central bankers as well-intentioned “bumbling uncles” rather than as knowing muggers and thieves. Naturally, neither view is always correct. Sometimes people are knowingly evil, other times they are just misinformed.
But, even if we take the mugger/thief view, I still enjoy writing these letters, and probably wouldn’t write them any differently.
I agree that neither view is always correct. I also understand that some people are well-intentioned but ill-informed while others are knowingly evil. In fact, I would say that most people by far are well-intentioned but just misguided. It is precisely those people with whom we should be reasoning and engaging in polite, civil discourse. Common sense arguments are much more likely to resonate with the man in the street than with, say, a Fed chairman.
Of course, if you are only writing for your own amusement, or for the satisfaction of imagining hard-core statists squirming uncomfortably in the face logic, then by all means. Just as long as you don’t expect to change anyone’s mind (at the Fed, at least).
I always have had one point of internal dissonance in regards to fractional reserve banking. I understand and agree with the argument stating its danger, but should we be encouraging the government to force banks to maintain 100% reserve ratios? Wouldn’t the pure free-market approach be to allow individual banks to determine their reserve ratio based on the risk tolerance of their depositors?
I’m hoping for a few comments on this.
axiomata:
Actually, you should look into the debate around “free banking”, as that issue comes up there. Generally, the free bankers say that the libertarian policy should be to allow banks to determine reserve ratios, but make sure that they give full disclosure to depositors. Often, they’ll also argue that free banking actually wouldn’t cause business cycles.
The 100% reserve folks not only point to the stability that they see is inherent in the fractional reserve system, but also often claim that fractional reserve banking is inconsistent with property rights, as it involves creating “pseudo claims” to money – which is inherently fraudulent. (Think of it this way: When I put money in the bank, I have full claim to it. When someone else borrows the money, the bank gives THEM full claim to it. The only way to keep this from being consistent with property rights is for the bank to disclose what’s happening and for me to give up my claim to the money they’re lending out. Naturally, I might take, say, a promise of future money in return. But, a promise of money is not the same things as money. The argument goes something like this. Rothbard goes into more detail in Man, Economy, and State, chapter 11, section 6.B.)
Hope this helps!
Dear Board Of Governors,
Where do you want it ? Don’t let me decide at your place.
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