The Federal Reserve Bank Must Be Destroyed

Tyler Durden's picture

Submitted by Patrick Barron via Mises Canada blog,

“Delanda est in Susidium Foederatum Bank”

(The Federal Reserve Bank Must be Destroyed)

During the years of the Roman Republic, Cato the Elder ended every speech with the phrase “Delanda est Carthago” (Carthage must be destroyed). Rome had fought two wars with Carthage, yet the threat to the Republic remained. Cato saw Carthage as an existential threat and concluded that Rome would not be secure as long as Carthage existed. So fervently did he hold this view that he ended every speech, even about completely different subjects, with the famous phrase. I believe that we Austrians need to adopt a similar phrase to remind the American people that the US faces an existential threat from the machinations of the Federal Reserve Bank. “Delanda est in Susidium Foederatum Bank”…The Federal Reserve Bank must be destroyed. Like Carthage, the Federal Reserve Bank cannot be controlled or restrained. Either it or our republic will survive, but not both. For the sake of our nation, the Fed must be destroyed.

 

Founding the Fed Instead of Ending Fractional Reserve Banking

The Fed was founded under false economic premises–to prevent bank runs by providing temporary liquidity to banks which found themselves unable to redeem their certificates and demand deposits for cash and/or specie. The real cause of illiquid banks–fractional reserve banking–was never seriously addressed. It was assumed that banks had the legal right to invest their customers’ demand funds in loans and that runs were caused by over indulging in this practice. But as Murray N. Rothbard explain in What Has Government Done to Our Money?, loaning demand funds instantly places  the bank in an insolvent position, for it cannot redeem all of its demand accounts for cash or specie. Through the process of lending demand funds, the banks have created fiduciary media out of thin air, reducing their reserve ratio below one hundred percent. If the banks do this on a very modest basis, the public may not be aware of the fraud. However, once the rumor starts that the bank is illiquid, there is a literal “run” to the bank to withdraw demand funds. In such a case, even a bank that only modestly lent its demand funds might find itself unable to honor all withdrawal claims and would be forced to close its doors.

(NOTE: Central Banking was established to legitimize counterfeiting fraud, aka – Fractional Reserve Banking)

The Federal Reserve Bank, as the lender of last resort, was supposed to prevent such occurrences by providing temporary, penalty rate loans to struggling banks. Note that there is nothing that a central bank could provide that could not be provided by another private bank. In fact the banking panic of 1907 was stemmed by private bank interventions led by J. P. Morgan. However, Morgan realized that such private bailouts were very risky and presented a case of moral hazard; i.e., that bankers, confident of a bailout by the Morgan banking empire, might  book riskier, higher yielding loans. So rather than face the real cause of banking crises and lobby to outlaw fractional reserve banking, the Morgans, Rockefellers, etc.–who did not want to forego the financial benefits of lending demand deposits–lobbied instead for government to create a lender of last resort, a central bank, which we named the Federal Reserve Bank.

 

Fed Policy Causes Depressions and Then Prevents Recovery

Over time this entity, new to Americans, would expand its role in fruitless attempts to cure crises caused by ITSELF. The Fed caused and exacerbated crises by allowing, facilitating, and expanding the practice of fractional reserve banking. In the 1920’s the Fed began to expand the money supply to prevent prices from falling, justifying its new role as one of maintaining a stable price level. But printing money to prevent falling prices caused malinvestment in the structure of production and led to a depression by the end of the decade.

Rather than do nothing and allow the purging of bad investments and liquidation of malinvestment, which would re-establish a sustainable structure of production, as it had done at the beginning of the decade in the depression that no one remembers, the Fed intervened monetarily to pump up reserves while the Hoover administration intervened fiscally to prevent price deflation and maintain high spending levels. All this is well documented in Murray N. Rothbard’s America’s Great Depression.

Yet even an interventionist Fed could not prevent the massive bank failures of the 1930’s, due to many factors which included restrictive bank branching laws. But the primary cause of the bank failures was *again* the banks’ adherence to fractional reserve banking practices which resulted in  their inability to honor all demand deposit redemption requests for specie and/or cash.

In the Roaring Twenties fractional reserve banking had expanded the money supply well beyond the ability of banks to stem all the runs. Again the banks and the politicians refused to dig deeper into the real cause of the problem. Rather than separate banking into deposit and loan functions–the former would require one hundred percent reserves and the latter would require strict asset-liability management to ensure that loans matured on the same schedule as time deposits, what is commonly known as funding loans out of savings–the government suspended specie redemption and eventually formed the FDIC to “ensure” bank deposits.

However, the FDIC’s “insurance” program was nothing more than an explicit promise that the Fed would print enough money to redeem all ensured deposits, thus insuring the continuation of fractional reserved banking, the very problem that was used as the excuse to establish the Fed; the very problem–bank instability–the Fed was sold to the public to solve. So, once again, a solution to cure a problem caused by the Fed itself resulted in even more power for the increasingly government run banking system.

 

The Monetary Genie Was Out of the Bottle

Once the politicians realized that the Fed could print money at will, the genie was out of the bottle. Money growth did expanded at a modest rate for a few decades, due mainly to the efforts of prudent men such as Fed Chairman William McChesney Martin (1951 to 1970) and fiscally conservative politicians such as President Dwight Eisenhower (1953 to 1961). However, it was inevitable that less prudent men, such as President Lyndon Johnson and all Fed chairman with the exception of Paul Volcker, would rise to power on their promises to fund all manner of government programs with what was now seen to be unlimited money.

This was the key revelation!

Money printed in unlimited quantities could cure all ills, or so it was claimed, and to its everlasting shame the economics profession provided sufficient “academic” cover to support these spurious assertions. Now everyone understood that the Fed could monetize–i.e., purchase government debt itself–any amount of government spending. The economics profession refused to consider the inevitable consequences of these irresponsible monetary policies. Instead it cherry picks historic price data to prove them to be non-inflationary and endorses changes to unemployment calculations to prove them to be fiscally sound, too. These whores, these house economists have their eyes glued to the rear view mirror of spurious government statistics as the race car of state hurtles toward an economic cliff of depression and perhaps even hyperinflation.

 

Money Production and Banking Subject to Commercial and Criminal Law

It matters not who is in charge of the Fed or what rules Congress may insist that it adopts. Once money printing, via fiat or fractional reserve credit creation, is seen to be both feasible, justified, and legal nothing and no one can stop it. The political pressure to fund government programs will be irresistible. Everyone knows that the Fed seemingly has the ability to solve their problem by monetizing the federal debt. Should it refuse to do so, we would see riots in the streets similar to what is happening in Europe as protesters target the European Central Bank.

The only solution is to destroy the monster that makes it all possible, the Fed. Without the ability to sell its debt to its own central bank, government would be forced to live within the means set by the will of the people through their elected representatives. The scales would eventually fall from the eyes of both politicians and public as its becomes clear that what government spends comes at the expense of the private economy. The public would no longer be fooled by government propaganda that its spending spurs the private economy, when it is clear that the only way government can spend is to tax the people or suffer the crowding out effect of private investment by government borrowing. Money production must be moved to private hands that are subject to normal commercial and criminal law, where money printing is nothing more than counterfeiting. Banks, too, must be subject to normal commercial and criminal law, which requires them to treat a demand deposit as a bailment for which they must keep one hundred percent reserves. Loan banking would be subject to the normal principles and well understood practices of sound asset-liability management, whereby loans are funded by real savings and the maturities of both loans and deposits must be coordinated in order for lending banks to honor their liquidity commitments. The path to the destruction of our nation through endless wars and welfare would end with the destruction of the Fed.

 

Delanda est in Susidium Foederatum Bank!

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wee-weed up's picture

Good luck with that!

Only after TEOTWAWKI

Publicus's picture

The solution is money printing for the little people.

observer007's picture

#Banks bankrupt

Credit Default Swaps:

http://cds-info.com

 

 

 

 

Greenskeeper_Carl's picture

Sorry, but Americans are too fat, stupid, and distracted to care. The economy will likely collapse, and rather than (correctly) place the blame directly at the feet of the federal reserve and the govt, the morons that comprise the vast majority of this country will instead beg the very institutions that caused the problems in the first place, begging them to DO SOMETHING, and willingly giving up any freedoms and prosperity we have left at the alter of bullshit these con artists have constructed at our expense.

freewolf7's picture

We can read all the ZH we want, but da peeps ain't gonna wake up till woar fucks with their personal hamster wheel.

Socratic Dog's picture

That won't wake 'em up.  Never did before.

Their sons will die heroes!

Anusocracy's picture

They have to have something that can wake up.

optimator's picture

Empty food stores usually wake the public up.

TruthInSunshine's picture

The Central Full Fractional Reserve Bank in the U.S. (even though a private entity), regardless as to its official name, has been destroyed twice so far - yet came back to life everything thereafter.

It's a vampire.

Ms. Erable's picture

Nuke it from orbit; it's the only way to be sure.

gadzooks's picture

No Space Nukes Please! the`ll turn them on us in a second!

turnoffthewater's picture

I only read the title, up vote for me. Been here to long

Joe Sichs Pach's picture

These articles continue to reiterate the same thing:  End The Fed.  

That concept and absolutely understood and embraced here.  This content tells us nothing new.  The crux of it all as it relates to this particular article is right here:

Money production must be moved to private hands that are subject to normal commercial and criminal law, where money printing is nothing more than counterfeiting.

Imagine if the Fed is gone tomorrow.  First thing Monday morning and our wishes come true - GONE.

How does the above happen?  We can complain all we want about the problems it causes but the key to it all is coming up with what's next.  What's fair.  What works.

Thisson's picture

Same as throughout history - let the people choose what they'll use as money.

J S Bach's picture

"The only solution is to destroy the monster that makes it all possible, the Fed."

 

True.  However, we must go even deeper and destroy the monsterS who created the Fed in the first place.  Otherwise, they'll simply bide their time and re-emerge at another time and date to enslave us once again.  

bwh1214's picture

This is a better explanation, and a more likely outcome than the destruction of the fed:

http://debtcrash.report/entry/history-and-introduction

Though I would prefer the fed being destroyed.

FIAT CON's picture

It is amazing how stupid most people are.

 I try to inform a lot of my friends slowy, I send them articles from zh that might  get one brain cell warmed up.

 The other day one younger guy said to me " you are just depressing me with the articles you send me"

So I said to him, imagine that you have a cut leg and you are slowly bleeding to death, wouldn't you want to know so you can stitch up the wound?

But sadly most people don't want to know, How the f*ck will we ever has a possibility of fixing the system if no one wants to hear/learn what's happening.

 Are they so dumb to think that that people that created this mess will fix it?

 

 

bwh1214's picture

I've been pushing this a lot cause it's the easiest to understand for newcomers which is important.

http://debtcrash.report/entry/history-and-introduction

The crash course is also good.

http://www.peakprosperity.com/crashcourse

MilwaukeeMark's picture

@Fiat Con

I feel your pain (sorry for the Bill Clinton line)

I try to explain to my grown children/son-in-laws, over dinner, exactly what's going on and their eyes glaze over, their minds wander and later when I get up from the table they mutter to my wife that I am getting too depressing and this could never happen here in America.

When I explained to my daughter that she might go to a neighborhood store and find no food, she said she'd simply drive to a store that had some food. How do you fix that?

I've decided to stop talking about it and just keep working behind the scenes to prepare my family.

I want no thanks if I am right, I expect they'll all be too shellshocked to remember any of my warnings.

game theory's picture

I don't like what the Fed has done...they've poisoned the economy (like chemo for the cancer patient). But all the calls to "end the Fed" never discuss the next logical step that will occur -- which is that US Congress will take over control of the money printing. And then we will all have a problem that is 1000 times worse than the Fed. The politicians in gov't would like nothing better than to get their incompetent hands on the printers. 

overmedicatedundersexed's picture

guys look at the bright side (those who think the fed is in a box)..every move has increased logarithmic wealth of the elite with that the power of the elite..so the owners of the FED are happy. anyone here thinking diff, well you missed the memo.

Questan1913's picture

"I don't like what the Fed has done...they've poisoned the economy (like chemo for the cancer patient). But all the calls to "end the Fed" never discuss the next logical step that will occur -- which is that US Congress will take over control of the money printing. And then we will all have a problem that is 1000 times worse than the Fed. The politicians in gov't would like nothing better than to get their incompetent hands on the printers."

A truly classic psyops comment....starting out with "I don't like what the fed has done.." following with 60 words slyly defending the fed and assasinating the constitutional order by referring to the only direct representatives "We The People" control. as incompetent.  By the way this is a familiar disinformation theme you should be well acquainted with as it is repeated over and over throughout the media and culture while simultaneously pushing and subtlely calling for increased presidential (dictatorial) powers.

I suggest we start identifying and calling attention to the techniques used by the oligarchy and its agents to subvert the US constitution, our liberty, and above all our ability to.think and reason.

game theory's picture

Agent of the oligarchy? Psyops? The only people that want congress in control of the printers are the oligarchs and those connected enough to be waiting for their piece of gov't pork (or cheese depending on your preferred food group).  The loudest complaints against QE have been from some of the wealthiest people. Why? And how does your view on China play into your view on QE and the fed's moves? 

 

sleigher's picture

"Are they so dumb to think that that people that created this mess will fix it?"

 

Stop it.  It's hard to think and it hurts.

marathonman's picture

Taking the red pill has some unadvertised side effects...

Hayabusa's picture

Carl is correct!  I'm not even sure why the Tylers would continue to post articles like this w/o some valid and workable strategies to replace the existing FED.  When you have

a lethargic, undereducated reality-TV-Watching, entitlement mentality populace distracted by bread and circuses you are but a lone voice in the wilderness shouting your message

to the empty wilderness... the sheeple are inside consumed by superficial nonsense and upset because they can't figure out why they are unhappy/unfulfilled in life.

Oracle of Kypseli's picture

Yes! Who is gonna feed the free shit army?

Revolution in your hands

cornfritter's picture

Well, you fish around for some other king that has an unsustainable free sh*t army, start to starve 'em all, then put rifles in their hands and launch them at each other, as in days of old.  Seems neither the ruling class nor the ruled have actually evolved in what? 25K yrs.?  Reckon we were better off in the trees before the geniuses showed up. :-(  

"Come on down here handsome, we'll show ya how to shave, and give you a better way of life... Ka-Fooking-Blam!!!"

BoNeSxxx's picture

So very sad... Yet so very true.

A system of slaves and masters... Cannon fodder for kings. Sheep and wolves.

Same as it ever was. Maybe (just maybe) global interconnectivity will cause just enough people to say 'eat shit we ain't dying for you assholes anymore'

Yea... I am a romantic and hope springs eternal. Molon Labe bitchez.

El Vaquero's picture

Better in the trees?  Look at what chimps do if some strange male comes into their territory.  They gang up on him, beat him to death, then eat him.  We just carry on that behavior, but on a much grander scale. 

MilwaukeeMark's picture

The "free shit group" are 'Useful Idiots'. Once they are no longer useful, the free shits stops.

You don't waste valuable lifeboat space for people who can't/won't/never have rowed. You save that space for those who can contribute to future survival.

Latina Lover's picture

I disagree. I think the USSA is pushing hard for war with Russia perhaps because the Fed Ponzi scheme is unravelling.

dreadnaught's picture

They are gonna have to raise the debt limit to INFINITY to pay for it all-then after all is destroyed will we see a debt jubillee..... 

A Lunatic's picture

If there is ever a Jubilee it will be for the Banksters and the rest of the Big Club, which 'We' are not a part of.........

cornfritter's picture

Probably... another thing, a lot of these welfare people coulda had 40 acres and a mule, but p*ssed it away on rent, and shiny trinkets (same can be said for much of the non welfare class too..)  It needs to break, and the moral thing to do is farm!!! I swear, put people to work with hand tools to keep 'em out of mischief.  May seem cruel, but believe me, many have considered the option of "vaccinating" (for safety) and mass graves.  Just not a great idea at all, not the moral play.  Fed needs to go away.  If Mises speaks of truly free banking (no laws whatsoever) - all dictated by law of the jungle, supply and demand, then OK!  See what rises and let the 95% parasites fall.  Give 'em hand tools like I got, sunzabitches.

Urban Roman's picture

That 40 acres and a mule line was just some bullshit they told the conscripts to get them to sign up.

Nobody (or almost nobody) ever got 40 acres and a mule. They got (maybe if they were lucky) a shitty factory job and an overcrowded slum to live in.

Kobe Beef's picture

But your overcrowded slum would now be culturally enriched by obsolete farm equipment, how vibrant!

iofera's picture

It's all a big conspiracy, isn't it, Bob?

Moron.

Van Halen's picture

In the United States, there are about 3000 of 'them' running 350 million of us off a cliff. Get rid of them and your problems will be well on their way to ending. Who are they? Every one of your highest political representatives in DC, most of your federal agency heads, some state governors, some billionaires, some media and entertainment heads, many banking heads, and a bunch of harder to identify types like your Grubers creeping around making mischief under the radar. If you follow fed money down to some of the big nonprofits or think tanks, you'll find these human devils at the end of those trails too.

Anusocracy's picture

You will still have government.

El Vaquero's picture

For better or worse (probably worse,) you are going to have a government if there are enough people.  There are too many sheep and there are too many wolves. 

RaceToTheBottom's picture

Get rid of the wolves and the next set of wolves will take their place.  It is the human condition.  Most people feel secure having wolves eat them...

TheReplacement's picture

Yes but if the new government is surrounded by the impaled heads of the old government they will be slightly more careful in their decision making.

bugs_'s picture

It should be cut into little tiny <fractional> pieces AND BURIED ALIVE!!

Harbanger's picture

All CB's function on fractional reserve.  Chinas, Russias, all of them, that's what banking is.  The bigger problem is having a single reserve currency.

Katastrofenhausse's picture

At least the fuckers in Weimar Germany had to physically print the fiat. Now these guys can just type in a number followed by a bunch of zeros and hit enter on a computer terminal.