By\u00a0George F. Smith<\/p>\n
March 21, 2026<\/p>\n
The Federal Reserve, or the Fed, is the central bank of the United States.\u00a0 Ever wonder why we have it?\u00a0 Only a few people care if it\u2019s still around, and they\u2019re the ones who profit from it. \u00a0In some cases they profit enormously. \u00a0The average person doesn\u2019t know about central banks and doesn\u2019t care to know. \u00a0To the ones at the top of the political \u2013 economic heap, this is how they want it.<\/p>\n
A central bank such as the Fed comes about through political favors \u2014 favors to big bankers and to politicians intent on buying votes and making war. \u00a0Where you find a country with a central bank, you have laws establishing it.\u00a0A central bank is not a voluntary agreement among bankers. \u00a0In practice, it is a sophisticated\u00a0counterfeiting racket<\/a>\u00a0backed by the monopoly force of government. \u00a0Remember, there would be no Fed without the Federal Reserve Act.<\/a><\/p>\n Central banks are often described as inflation fighters. \u00a0As monopoly producers of money, they are instead the sole source of inflation.\u00a0 The Fed\u2019s definition of inflation<\/a>\u00a0as \u201cthe rate at which the price of goods and services increases over time,\u201d serves as a cover for their crime of targeting (price) inflation at two percent.\u00a0 It\u2019s policy is to ensure the dollar buys less over time since only the naive believe low prices are good.\u00a0 As\u00a0a monetary thief<\/a>, the Fed has been a huge success.<\/p>\n Central banks such as the Fed are said to be responsible for making capitalism work. \u00a0By making honest price discovery impossible and raging war against savers, they are in fact anti-capitalistic. \u00a0If you want to kill capitalism and replace it with cronyism and instability turn the market over to central bankers.\u00a0 President Woodrow Wilson did, in late 1913.\u00a0 As\u00a0Keynes expressed it<\/a>:<\/p>\n Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. . . As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.<\/p>\n Almost every textbook that discusses the history of the the Federal Reserve will say it came about as a solution to the various Panics of the 19th century and the Panic of 1907. \u00a0What the textbooks don\u2019t discuss is why the Panics came about: the common practice of fractional reserve banking. \u00a0In simplest terms fractional reserve banking consists of a bank giving two people equal claim to the same monetary unit at the same time. \u00a0How\u2019s that for honesty?\u00a0 It\u2019s standard operating procedure. \u00a0With the exception of Austrian School economists, it is noncontroversial.<\/p>\n As central banks were called on to play a major role in funding World War I, European belligerents suspended payment in gold \u2014 in other words, they outlawed inflation-resistant money. \u00a0 Doing so prolonged the war and resulted in shocking\u00a0casualty figures<\/a>.<\/p>\n In the U.S. the public was strongly discouraged from turning in their paper money for the gold it represented, which allowed Fed \u201cmonetary policy\u201d to help fund the war<\/a>. \u00a0As historian Ralph Raico writes in\u00a0Great Wars and Great Leaders: A Libertarian Rebuttal<\/a>,<\/p>\n The First World War is the turning point of the twentieth century. Had the war not occurred, the Prussian Hohenzollerns would most probably have remained heads of Germany, with their panoply of subordinate kings and nobility in charge of the lesser German states. Whatever gains Hitler might have scored in the Reichstag elections, could he have erected his totalitarian, exterminationist dictatorship in the midst of this powerful aristocratic superstructure? Highly unlikely.<\/p>\n In Russia, Lenin\u2019s few thousand Communist revolutionaries confronted the immense Imperial Russian Army, the largest in the world. For Lenin to have any chance to succeed, that great army had first to be pulverized, which is what the Germans did.<\/p>\n So, a twentieth century without the Great War might well have meant a century without Nazis or Communists. Imagine that.<\/p>\n No Great War, (likely) no Nazis or Communists. \u00a0No central banks, no Great War.<\/p>\n Always, the US can launch a war because the Fed is on stand-by to help fund it,\u00a0regardless of economic consequences<\/a>.<\/p>\n Central bank funding inflates the wars themselves \u2014 makes them bloodier and longer \u2014 as it prints money for the belligerent governments to spend. \u00a0Central banking\u00a0makes war obscenely profitable<\/a>\u00a0for some. For the millions killed or wounded during WW I \u2014 and the vast death and destruction since then \u2014\u00a0 central banking has metaphorically brought\u00a0the devil himself to earth<\/a>.\u00a0 And see\u00a0this<\/a>.<\/p>\n Central bank money today is not restricted by anything tangible. \u00a0Individuals can purchase gold or silver coins but the coins are not money proper. \u00a0Only central bank digits and paper are money in the sense of serving as a widely-accepted medium of exchange. \u00a0But its acceptance is an outcome of government fiat, not the free market<\/a>. \u00a0Where you find fiat money \u2014 whether it\u2019s gold, silver, paper, or digits \u2014 you have\u00a0legal tender laws<\/a>, not a free market.<\/p>\n People don\u2019t care about monetary issues as long as their money buys things. \u00a0When it doesn\u2019t then they care, but they rarely understand it. \u00a0They know they\u2019re being cheated because prices continue to rise, but exactly how is a mystery. \u00a0\u00a0Even the gold-loving\u00a0maestro inferred<\/a>\u00a0fractional-reserve banking was a legitimate practice, as he describes credit expansion under the government-controlled gold standard:<\/p>\n Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time,\u00a0the banker need keep only a fraction of his total deposits in gold as reserves<\/em>. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). [Emphasis mine]<\/p>\n After he became Fed chairman, Greenspan told his audience<\/a>:<\/p>\n In the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, had allowed a persistent overissuance of money.<\/p>\n Counterfeiters tend to do that.<\/p>\n As Vera Smith concluded in her book\u00a0The Rationale of Central Banking<\/em>\u00a0(1936),<\/p>\n A central bank is not a natural product of banking development. It is imposed from outside or comes into being as the result of Government favors. This factor is responsible for marked effects on the whole currency and credit structure which brings it into sharp contrast with what would happen under a system of free banking from which Government protection was absent.<\/p>\n Central banks eat away at civilization, and never forget, it\u2019s\u00a0the State<\/a>\u00a0that makes them possible.<\/p>\n<\/div>\n<\/div>\n<\/div>\n