A Geek With Guns

Chronicling the depravities of the State.

Why the Federal Reserve is Evil

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It’s impossible to miss all the anti-Federal Reserve propaganda floating around but many honestly do not know why the Fed is such a terrible organization. Thankfully Ron Paul wrote a very accessible and to the point article on the subject:

The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank’s creation in 1913. It pumps new money into the financial system to lower interest rates and spur the economy. Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources.

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The manner of thinking of the Federal Reserve now is no different than that of the former Soviet Union, which employed hundreds of thousands of people to perform research and provide calculations in an attempt to mimic the price system of the West’s (relatively) free markets. Despite the obvious lesson to be drawn from the Soviet collapse, the U.S. still has not fully absorbed it.

The Fed fails to grasp that an interest rate is a price—the price of time—and that attempting to manipulate that price is as destructive as any other government price control. It fails to see that the price of housing was artificially inflated through the Fed’s monetary pumping during the early 2000s, and that the only way to restore soundness to the housing sector is to allow prices to return to sustainable market levels. Instead, the Fed’s actions have had one aim—to keep prices elevated at bubble levels—thus ensuring that bad debt remains on the books and failing firms remain in business, albatrosses around the market’s neck.

If you’re unfamiliar with the subject of the Federal Reserve I highly urge you to read the entire article. I can say without any doubt that ending the Federal Reserve is the most important task we have as Americans. Without the Fed most of the other major ills perpetrated by our government would become impossible to continue and our economy would have the biggest barrier between it and recovered removed.

Written by Christopher Burg

October 21st, 2011 at 11:30 am