Lets Get Rid of the FED, (Federal Reserve System) and Coin Our Own Money --- then what?

Hi Jim,

EDIT PER ADDITIONAL COMMENTS:

As I said, The Fed works, but it's not a perfect system. I agree that there should be a greater degree of accountability. But here's the flaw in Paul's argument...

Congress has all the powers of oversight it needs. No new law needs to be passed for Congress to get all of the information on policies, players, and procedures at the Fed. Congress created the Fed, and Congress can modify, repudiate or destroy the Fed. Contrary to popular belief, the Fed actually does respond to Congress.

The problem isn't secrecy at the Fed, it's Congress (of which Mr. Paul has been a member for some time) not doing their proper jobs of oversight.

And as for Government controlling this, I can only recall the words of the late, great sage, Peter Drucker who once said, "Governments do two things well: wage war and inflate currencies." He was right.

The LAST thing you want is for government to get its grubby hands on the money supply. Why do you think 3rd World currencies are non-convertable? Because these are countries whose government control monetary policy. Politicians like to keep taxes low and money plentiful. Thus, over time, the tendency is simply to print more and more money to ease problems... Next stop, Zimbabwe...

No, I do not trust government to manage the money supply. Politicians do not think in long terms; they only think in electoral cycles. Moreover, they're too narrowly focused on constituency issues to be concerned with the macroeconomic well being of the nation as a whole.

I end where I began -- The Fed isn't perfect, but the alternative is a nightmare of biblical proportions.

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I've read your questions for a long time now, and even posted answers to a few. You strike me as an intelligent and thoughtful individual; so let me talk to you as such.

A lot of people are going to post nonsense about the Fed that they saw on some Youtube video, and they're going to unload on the Fed as some gigantic conspiracy (and yadda yadda).

I'm assuming from your question that you already understand the structure and purpose of the Fed, so let me defend it. While I'm no fan of Dr. Greenspan's policies (and indeed, in large measure blame them for the current mess everyone's in) the fact is, the dollar has been well served by the Fed for almost 100 years.

In the 19th century, America had "wildcat bankers" who printed money and caused hyperinflation. Apart from internet conspiracy theorists, nobody thinks we can use gold to back modern currencies. John Maynard Keynes was correct when he characterized gold as a "Barbarous Relic." One of the reasons for slow economic growth in the middle ages was precisely because gold and silver were the currency. A lack of specie always cripples an economy. If you want the possibility of real growth, you must make the currency accountable to market forces of productivity, and free it from other artificial constraints. Money is a measure of economic activity -- not how many bars you have stored in Fort Knox.

The management of currency in a modern economy requires a collaboration between government and banking systems. It's not the easiest thing to understand or explain. And unfortunately, whenever something is difficult to understand, you can always bet on the conspiracy theorists oversimplifying everything for the sake of their own ignorance.

If you look at monetary stability for the century before the Fed, and the near century after its creation, the record is clear -- the Fed has more than fulfilled its mandate. This isn't to say it's a perfect institution; but its success has been such that every major industrial power on the face of the earth has taken steps to emulate it (in one way or another).

I vote for the future, and monetary stability -- not the past and its relics. Hope this helps. Cheers, mate.

All profits from the Fed go to the Treasury in excess of 4% return on capital. That portion is retained by the Federal Reserve System to increase capital. Feel free to coin your own money. A number of private mints do exactly that, although they are simply commemorative. Still, if people chose to use them as money there is no law against it. Federal Reserve Notes are backed by the coinage of the US Mint, but do you really want paid in nickles? A private currency system like Scotland's has long been proposed but it would take an important funding source from Congress and they hate giving up money.

I wouldn't abolish the FED, but I would abolish the IRS, as well as most of the wasteful government agencies. Understand that the system that the Federal Reserve has set up is ingenious. Brilliant in design, and a superior money system to that of precious metals. They are surly the modern day equivalent of the alchemists of old. For they have successfully taken labor, and turned it into gold. Gold on the other hand, devalues labor almost to the point of worthless.

Look at the historical effects that gold and precious based money had on the proletariat (working) class. It creates a society that deals in ingots and one that deals in dust. Serf and Master. You only need to look at the marvelous super cities that were built in the 19th century with the gold standard. The solid marble columns and ornamental details are mind blowing compared to today's architecture. The wealthy inhabited these mansions and estates, while the poor lived in the surrounding country in shacks, or leased apartments. In contrast there was no middle class.

To those who want to return to gold you must accept the fact that the appeal of gold backed currency is far more beneficial to the wealthy classes. Those who own the banks and are very wealthy are eagerly waiting for the return of gold. To them, gold is god.

You see the fault lies in the people and the people alone. By turning labor into gold the fed basically created a middle class. The middle class is the only ally that the working class will ever have. They are the prime investors of capital and the stimulus of the economy. These same people, being inherently inclined to "satisfy their desires by exerting the least amount of labor" used the system to escape toil, and the fruit of ones labor became profit for another. In doing this the middle class built itself up only to be knocked down. They also devised ways to escape taxation for their profits, leaving the burden to those who could afford it least.

To put such power into the hands of "government" is very tempting. There are reasons that should be evident to you why a private organization can handle the task more efficiently. That is unless you believe, that government will not abuse such power. Has no drive to create jobs that produce nothing but demanded everything. And in a sense does not act like a true entity or organism and has no desire to grow. This however, defies all logic. And since it wants to grow it must eat, it can be said that governments devour freedom. This is why freedom is less evident in society's that have the most government intervention. It is also why it is unwise to give government total control over the money supply.

We can sit here and cast the blame on the system and say, look what they have done. "They have devalued the dollar to the point of worthless, they have artificially raised or lowered interest rates to spur consumption. This is all true but they did so only because the people wished it. By using the credit system for business ventures, by taking loans out to buy property and goods. The people abused the system. They gave us what we wanted. Cheap credit.

Until, we are willing to place the blame on ourselves for the destructive exploitation of the the money supply, we will never solve this financial question. The only answer lies within the people. We must stop using the system for personal gain at the expense of others. Whether thats possible or not depends on us.

Why would you expect bad things to happen when the American people have honest money to use?

The truth is, most Americans are in debt. They are hooked on credit cards, and can't handle money (actually, currency). They need to clean up their act.

Getting back to honest money, this means that there would be no inflation. You wouldn't get a cost of living raise, because the cost of living would not increase. It would actually decrease! As technology brings costs down, our standard of living would rise. We can already see this in high tech items like computers and cell phones.

The only losers would be the bankers who run the Federal Reserve, and our own politicians. The bankers would loose the interest they earn on the treasury bonds they get for their FRNs. The politicians would loose the use of newly created "money". Currently, our politicians get this currency by selling treasury bonds to the Federal Reserve in exchange for more FRNs. Just as counterfeiters benefit from their product, our politicians use this new "money" before anyone else. The rest of us see the purchasing power of the paper diminished by the influx of new paper. This process is called INFLATION. And inflation is stealing.

Returning to honest money would put an end to stealing by bankers and politicians, and they will fight tooth and nail to prevent it.

Again you got the right person in the field of Currency, Notes & Coins production & control for a country. Normally, the printing of currency notes & minting of coins are controlled by the Central Bank in types & quantity and being processed for recycling to save & cut cost.

There must be reserved fund(gold & foreign currencies) in certain percentage or full backing for the issue of currency and its international value & rating go with it. The accumulated fund will be invested in ways decided by Govt to earn returns. The fault is not with FEB, but with the Govt System. No one will take away the Reserve Bank unless new Govt in power or a take over. It is not easy to set up a system and build up a reserve.

Change & modify the system & method within the set-up to do it right......learn from the well managed country.

There are certain ways to play or manipulate it to your advantage and US is doing it now to China and they are pointing finger at one another........Who is Who in the doing?

That was proposed over a hundred years back.

Greenbacks, as opposed to a gold standard.

The problem is, the money is then paper. Worthless.

Money is made so that your bills (in our case dollars) have a value beyond our borders, on the world market. In smaller countries, their currency has no value outside of their country.

Some would suggest that's just fine...but we are a player in the world market, and can't afford the dollar to be worthless. If it were, you would have to trade gold, silver, or something else of value to obtain goods...and that would be a disaster.

The whole problem was created when FDR abolished the gold standard in 1933 and the silver standard in 1935.

It will be called the United States of Zimbabwe.