The Fed

Recorded at Jekyll Island, Georgia; 26 February 2010.

Not all reforms are improvements. As we have seen, the 100-percent-reserve solution is ripe with unintended consequences.

Our analysis holds that the key reason for financial instability is not the repeal of the Glass-Steagall Act as such but the existence of the central bank.

"Market prices can get screwed up when the Fed tinkers with interest rates. Because of the distorted price signals, the actual real resources are invested improperly."

What we need is something else: the establishment of a different kind of monetary system, one that uses competitive markets in the area of money and banking, and that eliminates the currency monopoly of the state.

We should not be fooled into believing that the economy will crumble without high government spending and loose credit organization.

We can understand the reaction today to people calling to "end the Fed."

From the market point of view the Fed is a bankrupt institution.

But prosperity can't be printed. Government edicts won't magically make us better off. Their fatal conceit will only lead us to disaster.

The Federal Reserve was created in 1913 by Morgan men to cartelize the banking system and limit competition. This is fractional reserve banking rather than 100% reserves. Rothbard thinks it is fraud. It increases the money supply in an inflationary manner by creating money out of thin air.