Money Mistakes

Recently by Thomas E. Woods, Jr.: HuffPo's 11 Myths About the Fed, Refuted

As I noted not long ago, I find myself in serious disagreement with a portion of the end-the-Fed movement. This is the segment of the movement whose complaints are that the Federal Reserve is “privately owned,” that the Fed does not inflate enough, that interest payments are unjust or inherently unpayable all at once, etc.

This is not nit-picking. I am not interested in replacing the Fed with something as bad or worse. The problem with the Fed is not that it isn’t socialistic enough. The problem with the Fed is that it is a creation of Congress and operates with special privileges granted by the government. If only the Fed were truly private, with no government-granted privileges. Then it could do no damage whatever.

As I also noted, I recently asked an antagonist on Facebook to write out his ten propositions on money, so we could try to get to the bottom of our differences. I posted them last week. Right now I’ll reply to this one:

“Monetary deflation benefits the private bankers who wish the People to default in order to seize collateral with, or without govt force.”

This is clearly incorrect. In addition to not wanting the hassle of trying to unload collateral in a potentially illiquid market, no bank would want to seize collateral during a deflationary period at all! When asset prices are falling, why would banks want to grab assets? Who would want an asset that’s in the middle of seeing its price fall?

Ah, but couldn’t the banks coordinate the deflation together, and then when it hits bottom, grab all the assets at that moment, when their prices have nowhere to go but up? Even assuming that bankers would adopt such a far-fetched strategy, there is no way for them to know at what point in the deflationary process the defaults are going to occur.

If there's something we're supposed to fear from banks, this sure ain't it.

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Reprinted with permission from