Ron Paul submits legislation to abolish Fed. Reserve

[jschaud]

http://www.govtrack.us/congress/bill.xpd?bill=h110-2755

What would be the most profound impact of this type of move?

[LooseCaller]

someone would post it on an internet message board before the proposal was laughed out of the congress and ron paul would return to the bitter bitter life of a person who futilely spends his days talking to a brick wall.

[Taso]

^That's about right.

[adios]

You provided a bogus answer. Why is the Fed necessary? Basically, Milton Friedman, among others have stated that the Fed's restrictive monetary policy was the major cause of the great depression i.e. they turned an economic downturn into a economic disaster. Also Fed policy in the 70's no doubt led to hyper inflation. Many prominent economists have blasted Fed policy over the years. Especially those in the years prior to Volker and Greenspans tenure. Many have claimed that the Fed is not quite "kosher" shall we say when it comes to whether or not it's constitutional. Also the Federal Reserve came into being in 1913. Somehow the United States was able to grow and function up until 1913 without the Federal Reserve.

A deceased Texas Congressman (I believe he's deceased) named Wright Patman was a staunch critic of the Fed. He has very famous quote about the Fed:

"Constitutionally, the Federal Reserve is a pretty queer duck."

Bob McTeer (a Fed governor at one time, I don't think he's a governor anymore) defends the Fed in this write up:

A Queer Duck or a Duckbill Platypus?

Here's what McTeer lays out at the constitutional justification for the Fed:

While we have many roles, it is our responsibility for monetary policy that makes insulation from political influence imperative. The U.S. Constitution gave to Congress, rather than the Executive Branch, the power to "coin money and regulate the value thereof." Congress, in effect, delegated that responsibility to the Federal Reserve in 1913. Subsequent legislation has spelled out our monetary role in more detail.


Here's a link that's critical of the Fed. He wrote a long book about the inner workings of the Fed.

Ducking for Cover


Here's the last paragraph of what he wrote that more or less sums up what he feels needs to change:

Opening up the central bank is not simply a matter of more documents disclosure or more public speeches. It requires a thorough overhaul of the institution itself, its obligations and accountability to citizens, its long-held
attitudes about its place in the structure of American democracy.

I think it's clear that many people feel that the Fed in it's present form needs to be changed and it's there's a good case for it given it's history. Having control of the currency like it does gives it a great deal of power. To dismiss someone out of hand who questions why we need it and inquires about better ideas seems to be demonstrative of a closed minded attitude.

[iron81]

Would someone mind posting the history of how the Fed's responsibilities were handled before its existence?

[adios]

[ QUOTE ]
Would someone mind posting the history of how the Fed's responsibilities were handled before its existence?

[/ QUOTE ]

Here's a couple of books you might find interesting:

Money Mischief: Episodes in Monetary History by Milton Friedman

Monetary History of the United States, 1867-1960 by Milton Friedman and Anna Jacobson Schwartz

[AlexM]

[ QUOTE ]
You provided a bogus answer.

[/ QUOTE ]

No, I agree with Ron, but I'd say the answer was pretty accurate. Congress is going to ignore it and go on with their lives.

[adios]

[ QUOTE ]
[ QUOTE ]
You provided a bogus answer.

[/ QUOTE ]

No, I agree with Ron, but I'd say the answer was pretty accurate. Congress is going to ignore it and go on with their lives.

[/ QUOTE ]

Original Poster asks:

What would be the most profound impact of this type of move?

I'd say that the response we're referring at best side stepped this question and at worst tried to demean the question as being stupid. IMO that's a bogus answer to that question.

If the question was:

What will Congress do about Ron Paul's legislation to abolish the Federal Reserve?

Then the response isn't bogus. Alas that's not what OP asked though.

[MrMon]

[ QUOTE ]
Would someone mind posting the history of how the Fed's responsibilities were handled before its existence?

[/ QUOTE ]

I am not an expert on the Fed, but anyone with a knowledge of the economic history of the U.S. before and after the founding of the Fed in 1913 would notice a definite difference in the number of financial and banking panics before and after that date. With the glaring exception of the Great Depression, when economics was in its infancy, the economy of the U.S. has been remarkably stable compared to the years prior to the Fed. The Fed isn't perfect, but compared to what used to happen, creation of the Fed and elimination of the gold standard have been good things and most mainstream economists would agree, naysayers and conspiracy theorists notwithstanding.

[Borodog]

[ QUOTE ]
I am not an expert on the Fed, but anyone with a knowledge of the economic history of the U.S. before and after the founding of the Fed in 1913 would notice a definite difference in the number of financial and banking panics before and after that date. With the glaring exception of the Great Depression, when economics was in its infancy, the economy of the U.S. has been remarkably stable compared to the years prior to the Fed.

[/ QUOTE ]

Prior to the introduction of the Fed, financial and banking panics were localized, and sharp but short. After the Fed depressions became economy wide occurances with durations measured in years and not months.

Besides, the problems of the banking industry before the Fed were not due to the absence of a banking monopoly, but rather because of fractional reserve banking. The version of FRB that we have these days has successfully (since the introduction of the FDIC after the Great Depression) forestalled bank failures by convincing the public that there is no need to physically withdraw their funds in hard times because they re "insured", but that doesn't mean the policy is economically sound. Inflationary banking policy still causes depressions (no matter what you want to call them: depression -> recession -> slow down; in a few years we'll be calling them economic siestas, I'm sure), and a monopoly inflationary currency is worse than competing inflationary currencies, which act as a competitive brake on the rate of inflation.