One Man in a Million

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In 1919 a book
was written that contained a brief passage about how to bring any
modern society to its knees without firing a shot.

There is
no subtler, no surer means of overturning the existing basis of
society than to debauch the currency. The process engages all
the hidden forces of economic law on the side of destruction,
and does it in a manner which not one man in a million is able
to diagnose.

At no time
in college did I come close to even hearing about that passage,
let alone actually reading it. The book in which it appeared was
not assigned, nor was the idea of "currency debauchery"
discussed in any political science or economics class. From what
I've read of the author it is by far the most profound thought he
ever penned, and one of the most important ever written. If every
high school student were required to imbibe this passage as a condition
of graduation, the world would likely be facing a sunnier future.

for the world, the author became famous for raising currency debauchery
to a political and economic ideal. The teachers of today's students,
in high school and elsewhere, were trained to accept that ideal,
in some cases as a condition of graduation. Debauchery — inflation
— is and has been standard operating procedure of every country
that boasts a currency, with the inflating done slowly, at least
in the West, so people won't notice. The only exceptions occur when
those mysterious recessions arrive that require heavier doses of
inflation to prevent the price level from falling. God help us if
our cost of living ever declined.

Ninety years
after publication of that passage, another book has arrived calling
for the abolition of the world's most respected currency debaucher,
the U.S. Federal Reserve. It's author, Ron Paul, has spent the better
part of his career trying to wipe the Fed and its toxic effects
off the face of the earth. His new book, End
the Fed
, is, as the title indicates, a death threat to the
central bank. Given Paul's popularity among libertarian activists
and his congressional support for blowing the lid off Fed secrecy,
the book cannot be dismissed as fanciful.

Paul's libertarian
view of the Fed brought to mind the 1950 Damon Knight short story,
"To Serve Man." In that tale, aliens pay a visit to earth
and claim to be man's benefactors, telling a special session of
the U.N. that they want "to bring [them] the peace and plenty
which we ourselves enjoy." Two U.N. translators steal one of
the aliens' books and manage to translate the first chapter, only
to discover to their horror that it's a cookbook.

As he has done
countless times, Ron Paul has translated the Fed-speak of the central
bankers and its many defenders and subjected it to the rigors of
free market and moral analysis. And the results are no less frightening
than the aliens' culinary recipes for mankind.

Can the Fed
be reformed?

The first chapter
of Paul's 210-page book brings the curious on board by explaining
why we should care about killing "the beast," as he refers
to the Fed on at least one occasion. Wouldn't it be more reasonable
to push for reform? Abolishing any government creature is virtually
impossible, especially one nearly a century old that serves as a
pillar of the leviathan state. Isn't a leader who calls for its
abolition setting himself up for defeat?

The answer
is no, for at least two reasons. One, any reform of the Fed would
be pointless. Reform would imply it could exist in some condition
that would be beneficial to all Americans. As a banking cartel with
the license to counterfeit, there is no version of the Fed consistent
with the ideas on which our welfare depends: voluntary exchange
and private property. Second, abolishing the Fed is absolutely necessary
if we care about freedom and civilization, because the central bank
and its printing press are destroying both.

Ending the
Fed, Paul writes,

[W]ould bring
an end to dollar depreciation. It would take away from the government
the means to fund its endless wars. It would curb the government's
attacks on the civil liberties of Americans, stop its vast debt
accumulation that will be paid by future generations, and arrest
its massive expansions of the welfare state that has turned us
into a nation of dependents. [pp. 6–7]

One of his
core beliefs is that,

Bad economic
policy can destroy a civilization — no policy is more dangerous
than bad monetary policy. [p. 9]

He moves on
to the Fed's fictitious history of how it was conceived as a means
of curbing those injurious panics and recessions of the 19th
century, and particularly the Panic of 1907. The solution to the
problem of panics, said the bankers, was a more elastic currency,
which is banker talk for money they could create when they wanted
it. The banks also needed some institution to bail them out when
they got in financial trouble. To accomplish their aims, the banking
elite, together with key politicians, devised a plan for a central
bank with a faade of decentralization. They called it the Federal
Reserve, and it was passed into law by a depleted Congress two days
before Christmas in 1913.

One Fed champion,
the Comptroller of the Currency, issued a statement in 1914 that
the Fed "supplies a circulating medium absolutely safe,"
and that all the previous panics would "seem to be mathematically
impossible." He went on to say that "national-bank failures
can hereafter be virtually eliminated." [p. 24] Drawing on
data from the National Bureau of Economic Research, Paul shows that
at least 18 "mathematically impossible" recessions have
occurred since the Fed's creation.

Later, he discusses
the connection between central banking and government's appetite
for war, and how the Fed provided the bulk of the funding needed
to send Americans overseas to fight in the European bloodbath of

For the United
States, [the "Great War"] meant the entrenchment of
the imperial presidency and a globalized foreign policy mission.
For Germany, it created the conditions of the great inflation,
which led to Hitler . . . For Russia, it meant the beginning of
Communism. [p. 66]

In a very real
sense, we're still fighting the "war to end all wars"
that central banking made possible.

In a chapter
called "The Current Mess," Paul discusses why the housing
bubble burst and why the government's response to it will only intensify
the crisis. The suffering of housing and other sectors were "symptoms
of a deeper problem: the Fed and its role in sustaining an unsustainable
paper money system." [p. 124] Even Treasury secretary Timothy
Geithner admitted to Charlie Rose that "easy credit" was
one of "three types of broad errors of policy" that created
the crisis, though as Paul's partial transcript of their conversation
reveals, Geithner didn't name the Fed as the culprit.

The Fed created
moral hazard by inducing "investors, savers, borrowers, and
consumers to misjudge what was going on." Fed low interest
rates created opportunities for quick profits, and competitive pressures
made them virtually impossible to resist. But as Paul makes clear,

The problem
isn't with the choices made by central bankers, [such as low interest
rates]. The problem is that they possess the power to make any
choice at all. [p. 127]

The bursting
of the housing bubble, he asserts, marks the end of a monetary era
— the end of the fiat dollar reserve currency system. [p. 125]

is key

In his final
chapters he makes the case for ending the Fed from four perspectives:
philosophical, constitutional, economic, and libertarian. Simply
stated, the Fed "is immoral, unconstitutional, impractical,
promotes bad economics, and undermines liberty. Its destructive
nature makes it a tool of tyrannical government."

Nothing good
can come from the Federal Reserve. It is the biggest taxer of
them all. Diluting the value of the dollar by increasing its supply
is a vicious, sinister tax on the poor and middle class. [p. 141]

In the last
chapter he shows us the way out: "unplug the machinery of the
Fed." [p. 202]

In an ideal
world, the Fed would be abolished forthwith and the money stock
frozen in place. . . credit would be rooted in money saved, not
money created. Congress would remove the Fed's charter, and the
president would stop appointing Fed governors." [p. 203]

Along with
this, the government's gold stock would be used to guarantee the
convertibility of the dollar "at home and abroad," resurrecting
the dollar's role as the world's preeminent hard-money currency.

But Paul doesn't
stop here. We should reconsider and ultimately reject "the
entire idea of a government monopoly on money." We should repeal
legal tender laws and let everyone who wants to get into the business
of money production. "This would create a competitive market
in which the best monies would emerge over time to compete directly
with the federal government's dollar." [p. 205]

This is the
ideal world, but unfortunately not the real one. Paul does not expect
a "graceful transition to sound money" for various reasons,
including the powerful corporate welfare-warfare constituency that
demands "financing well beyond what could be paid for through
taxes or even borrowing." [p. 207]

Thus, as we
work for reform, we should prepare for hyperinflation, poverty,
depression, and quite possibly war, "as protectionist sentiments
around the world grow." [p. 208] If there's good news, it's
that most big government supporters are people of good faith who
are misinformed. We must learn how liberty works ourselves then
help educate those who do not understand. We should draw encouragement
in knowing truth is on the side of liberty.

Even if you're
well-read in Ron Paul, End the Fed will provide an invigorating
presentation of the problems of the central bank. Personally, I
couldn't put it down. It is an invaluable resource for any advocate
of sound money and liberty.

F. Smith [send him mail]
is the author of The
Flight of the Barbarous Relic
, a novel about a renegade Fed
chairman. Visit his website.
Visit his blog.

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