There are some people that want to end the Federal Reserve for all the wrong reasons. Unfortunately, their flawed thinking has led them to advocate misguided “solutions” that are harmful. Here are five wrong reasons to oppose the Federal Reserve:
Wrong Reason #1: The Federal Reserve is a “private” bank.
While it is true that the Federal Reserve was created for the benefit of private banking interests, it is not private in the sense of a privately owned business in a free market. In fact, the Federal Reserve is a socialist/fascist bank because it was given a monopoly over the monetary system by a ruling class (government). Government enforces the monopoly by imposing legal tender laws and extorting its subjects with taxes that must be paid in Federal Reserve Notes. Thus, it’s the violence of government that keeps the racket operating. Furthermore, the Federal Reserve has the ability to socialize losses of the banking system onto the public through bailouts and inflation. Needless to say, these are not the characteristics of your neighborhood’s privately owned businesses. They can’t force you to use their products and they can’t pawn off their losses onto you. Repeating the misconception that the Federal Reserve should be ended because it is a “private” bank unwittingly gives the free market the blame when it is actually the solution.
Wrong Reason #2: The government should be in control of the money supply, not the Federal Reserve.
Politicians are the most untrustworthy and corrupt people on the planet. Trusting them with a monopoly over the monetary system is just as asinine as trusting bankers with it. They will always sell their power and influence to the highest bidder. Ironically, that’s exactly how the Federal Reserve was created. Even if you succeed in transferring the monopoly from the bankers to the politicians, it would eventually end up back in the hands of the bankers. To prevent this, you need to stop believing politicians should have any power at all. They have no right to coerce or compel. They are just like any other human being.
Monopolization of money by a coercive entity, whether it’s a government or a central bank, is the problem. One specific type of money shouldn’t be imposed by force on everyone as a one size fits all solution. It’s immoral and unproductive. The free market, which is simple voluntary interaction, should produce money based on supply and demand just like any other product or service. The individual has the right to choose whatever type of money is best for them. This might include choosing from several competing forms of money.
Wrong Reason #3: Money is the root of all evil and should be abolished.
Money is a free market invention that simplifies trade and makes cumbersome barter obsolete. It saves time, saves labor, and reduces disputes during trade which increases everyone’s standard of living. No sane person would say that’s evil! Again, it’s not money itself which is the evil, but the use of violence to monopolize and control money.
An economy without money would be primitive with little to no advancement. If you want to set up a community to live without it and everyone in the community agrees to it, then that’s fine. I doubt you would get many volunteers though, especially if your community is adjacent to a thriving free-market community using money!
Wrong Reason #4: Banks are evil and should be shut down.
Fractional reserve banking is a problem, but not the entire concept of banking. Fractional reserve banking is a fraudulent mixture of two different types of legitimate banking: loan banking and deposit banking. In loan banking, a customer accepts some risk and inaccessibility to his money while it is loaned out for an agreed upon time period in exchange for potential interest payments. In this case, the bank is a middle man providing a valuable service helping to connect lenders and borrowers. In deposit banking, the customer pays the bank to safeguard the customer’s money and the customer has access to it on demand. In this case, the bank is providing a valuable service of security and protection.
Fractional reserve banks are fraudulent because they pretend to be a deposit bank while acting like a loan bank. They pretend that all of their customers with demand deposits can redeem them at any time and in full, but this is not true. Fractional reserve banks only have a fraction of those deposits on reserve and couldn’t possibly fulfill its obligations if a significant portion of its customers tried to redeem simultaneously. Due to this inherent insolvency, fractional reserve banks require the forceful backstop of government and central banks to exist. This is achieved through legal tender laws, bailouts, and deposit insurance. Without these backstops, fractional reserve banks would go bankrupt. Free-market banking with competition and consumer discretion would drive the reserve ratio close to 100%, eliminating the problem of fractional reserve banking.
Wrong Reason #5: Charging interest is a crime and should be abolished. The banks will end up owning everything if they are allowed to charge interest.
If interest is being charged on a loan of counterfeit money created by the Federal Reserve which has a government sponsored monopoly, then yes, that’s a crime. However, it’s nonsense to say that all interest is criminal. This would be like arguing rental car companies or hotels are criminal because they charge a fee for other people to borrow their property. Interest in a free market where the transaction is consensual and all terms are upfront and honest is legitimate, rational, and productive. Both the borrower and the lender feel the transaction makes them better off or they wouldn’t do it. The lender gets some income for giving up access to his capital and having to delay gratification. The borrower gets immediate access to capital rather than having to delay gratification and save the capital himself. If you want to abolish this type of interest by using government law, then you are the criminal because you are advocating that violence be initiated against peaceful people for engaging in consensual trade.
The amount of wealth in the world isn’t a fixed pie or zero-sum game where there is a winner and a loser in every transaction. If that were true, no transactions would take place. People aren’t so dumb that they would remain blind to coming out the loser in half their transactions. Wealth is created through economic growth which benefits everyone. Obscene wealth disparity is caused by government and central banking fraud and force, not by honest free market savings and investment. In a free market, people become wealthy by producing things that other people want at a price they are willing to pay. Part of this process is channeling saved capital to productive business. Without interest, there is little incentive to under-consume and save capital. Without saved capital, there is no capital investment. Without capital investment, there is no increased production of goods and services. Without increased production of goods and services, there is no increased standard of living. Like a society without money, an interest-free society would be a primitive society with little to no economic advancement.
So instead of ending the Federal Reserve for the wrong reasons, do it for the right reasons: It is a monopolized money and banking racket imposed by the violence of government. It is anti-freedom, immoral, and terrible economics.