May

8

The Malicious Myth of the ‘Libertarian’ Fed

Filed Under Austrian Economics 

The Malicious Myth of the ‘Libertarian’ Fed
by Thomas J. DiLorenzo

In the history of American politics the statists have always been advocates of a central bank, whereas the defenders of liberty – libertarians – have opposed it. Legalized governmental counterfeiting has always been every totalitarian’s dream and every right-minded libertarian’s nightmare.

A Federal Reserve publication entitled “A History of Central Banking in America” correctly calls Alexander Hamilton “the founding father of central banking in America.” His nemesis, Thomas Jefferson, strongly opposed Hamilton’s Bank of the United States as a mortal threat to liberty and economic stability. So did Jefferson’s political heir, Andrew Jackson, who vetoed the re-chartering of Hamilton’s Bank of the United States. By that time (the late 1830s) the face of the Hamiltonian/statist cabal in American politics was the face of the Whig Party, and no one was a more strident advocate of a central bank than the young Whig Abraham Lincoln. After being snuffed out by the 1840s, central banking was revived by Lincoln’s National Currency Acts in the 1860s, and then finally cemented into place fifty years later with the creation of the Fed.

The great libertarian Austrian School economists Mises, Rothbard and Hayek (among others) all opposed central banking, whereas the “mainstream” of the economics profession has always played the part of court historian, assuring the public in their publications that the Fed – a secret organization that is responsible to no one and which has never been audited – always acts purely in “the public interest” by “stabilizing” the economy. Read any edition of Paul Samuelson’s famous textbook, Economics, if you’re skeptical of this claim. Or read any “mainstream” introductory economics textbook for that matter.

So it is curious, if not outright bizarre, that several commentators are now blaming the current economic crisis on the “libertarian” Fed! Business historian John Steele Gordon absurdly argued in the Wall Street Journal several months ago that the cause of the current crisis is “the baleful influence of Thomas Jefferson” and his anti-central bank philosophy, which lives on to this day. The Fed is “too libertarian,” in other words, and not enough of a central planning institution according to Gordon. That would certainly be news to the most famous libertarian political figure in the world, Congressman Ron Paul.

Stockbroker Henry Kaufman of Henry Kaufman and Company recently wrote in the Financial Times that “libertarian dogma led the Fed astray.” This absurd claim is being repeated by other Wall Street establishment mouthpieces, even including the disgraced former governor of New York, Eliot Spitzer. Spitzer recently went on MSNBC to argue that because Alan Greenspan associated with “Ann Rand” fifty years ago, the Fed is a “libertarian” institution. All of these commentators conclude that what is needed, therefore, is even more central planning and regulation by the central bank.

All the layman has to do to recognize what a big fat lie the “libertarian Fed” story is, is to go online and Google a Fed publication entitled “The Federal Reserve System: Purposes and Functions.” In addition to recklessly manipulating the money supply and causing boom-and-bust cycles for more than ninety years (including the Great Depression and the current one), the Fed “has supervisory and regulatory authority over a wide range of financial institutions and activities.” That’s an understatement if ever there was one. Among the Fed’s “functions” are the regulation of:

* Bank holding companies
* State-chartered banks
* Foreign branches of member banks
* Edge and agreement corporations
* U.S. state-licensed branches, agencies, and representative offices of foreign banks
* Nonbanking activities of foreign banks
* National banks
* Savings banks
* Nonbank subsidiaries of bank holding companies
* Thrift holding companies
* Financial reporting procedures
* Accounting policies of banks
* Business “continuity” in case of economic emergencies
* Consumer protection laws
* Securities dealings of banks
* Information technology used by banks
* Foreign investment by banks
* Foreign lending by banks
* Branch banking
* Bank mergers and acquisitions
* Who may own a bank
* Capital “adequacy standards”
* Extensions of credit for the purchase of securities
* Equal opportunity lending
* Mortgage disclosure information
* Reserve requirements
* Electronic funds transfers
* Interbank liabilities
* Community Reinvestment Act sub-prime lending demands
* All international banking operations
* Consumer leasing
* Privacy of consumer financial information
* Payments on demand deposits
* “Fair Credit” reporting
* Transactions between member banks and their affiliates
* Truth in lending
* Truth in savings

All of this financial market regulation and regimentation was in full force during the Greenspan era. None of it could conceivably be considered to be “libertarian” or “free market” in any way. The Fed is a government central planning agency, period. As such, it is as far away from being a libertarian institution as one can imagine. That’s why the Barney Franks of the political world are staunch Fed defenders whereas “Mr. Libertarian,” Congressman Ron Paul, is its fiercest critic.

May 8, 2009

Thomas J. DiLorenzo [send him mail] is professor of economics at Loyola College in Maryland and the author of The Real Lincoln; Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book is Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution – And What It Means for America Today.

Copyright © 2009 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Original URL:

http://lewrockwell.com/dilorenzo/dilorenzo171.html

Comments

5 Responses to “The Malicious Myth of the ‘Libertarian’ Fed”

  1. Mercutio Finn on May 15th, 2009 12:40 pm

    Kudos for passing around a great article. A “libertarian fed” is a little like the “pacifist A-bomb”, the “radical moderate” or the “pedophile who only goes for kids over 40.”

    One day, hopefully, Americans will wake up and realize that the “Soylent Fed is Government!”

  2. jim kearney on May 15th, 2009 1:57 pm

    Ahh, connecting the good with the bad to make the good appear bad with misinformation, misdirection and mislabeling, this is one of the oldest tricks in the book. I am glad you posted this article. It reveals the depth to which they are afraid of Libertarians and what Libertarians really stand for.

    I hope it didn’t surprise you that such garbage was being printed out there. The leftist will quietly do what ever they can to further their agenda. If they cannot takeover an organization they will do anything they can to discredit it and/or dismantle it. This has always been a tool of any organization (except Libertarians – some how it is repugnant to them – go Libertarians). It is even taught as a valid way to infiltrate organizations by government agencies.

    While the lies are out there, and we have to deal with them, we should never loose sight of the goal. It is better to ignore the lie and keep moving forward then it is to be disrupted and deal with it. Keep plugging away and when the right times comes put out the truth. If you spend time refuting the lie then your enemy will continue moving forward as you fall back.

  3. American Citizen on May 15th, 2009 9:00 pm

    Here’s a really interesting online article related to economics, doublethink and govt con games. http://www.earthsharing.org.au/2009/02/24/hudson-orwellian-doublethink-nationalize-the-banks-free-markets/

  4. Mercutio Finn on May 16th, 2009 2:42 am

    “The leftist will quietly do what ever they can to further their agenda”

    I would tweak this to read, “The statist will quietly, or sometimes loudly, do whatever they can to further their agenda”. There has been a non-partisan consensus in the mainstream to discredit libertarians on not just this issue but in general for years.

  5. jim kearney on May 16th, 2009 3:29 am

    LOL

    But of course, the republicans are slowly learning what the leftist are doing. That’s why they are now infiltrating the Libertarian Party. It should have been obvious to everyone when the party platform got changed. They pulled the old “if you can’t beat them, join them” routine. Now there is a mix match of real Libertarians still trying to save it all and wanna libertarians still hanging onto their republican ideals.

    We are so screwed – it is by far, time to move forward from OUTSIDE the political spectrum.

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