A Quote by Murray Rothbard
Having examined the nature of fractional reserve and of central banking, and having seen how the questionable blessings of Central Banking were fastened upon America, it is time to see precisely how the Fed, as presently constituted, carries out its systemic inflation and its control of the American monetary system.
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Repeal the entire Banking Act of 1933, and Austrian School economists will cheer, especially if the current system were replaced by a 100%-reserve competitive banking with no central bank. That banking reform would give us a sound money system, meaning no more business cycle, bailouts, or inflation.
The Fed is pushing a variety of workarounds that would inject trillions in new money into the economy while bypassing the banking system altogether. Time will tell whether or not this will succeed. Meanwhile, a serious danger lurks around the corner. Once the recession is over, the lending will start again. With fractional-reserve banking and limitless supplies of cash on hand, we will likely see the overall price trends reversed, from deflation to inflation to possible hyperinflation.
War has generally had grave and fateful consequences for the American monetary and financial system. We have seen that the Revolutionary War occasioned a mass of depreciated fiat paper, worthless Continentals, a huge public debt, and the beginnings of central banking in the Bank of North America.
In 1977, when I started my first job at the Federal Reserve Board as a staff economist in the Division of International Finance, it was an article of faith in central banking that secrecy about monetary policy decisions was the best policy: Central banks, as a rule, did not discuss these decisions, let alone their future policy intentions.
When you own gold you're fighting every central bank in the world. That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the price of government bonds. And that's why central banks long have tried to suppress the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power.
In the U.S. more than any other place, the banking system is insane. Millions of Americans lost their houses. Because of what? Because of the banking system. This American banking system is also coming to Europe. We can say today that the banks and high financiers run the world.
Central banks have gotten out of the central banking business and into the central planning business, meaning that they are devoted to raising up-if they can-economic growth and employment through the dubious means of suppressing interest rates and printing money. The nice thing about gold is that you can't print it.
Quantitative easing is just the latest chapter in the Federal Reserve’s hundred-year history of failure. (...) The American people have suffered long enough under a monetary policy controlled by an unaccountable, secretive central bank. It is time to finally audit - and then end - the Fed.
It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. [I]f the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with 'free banking.' The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.
They [political leaders ] thought the only problem was the banking system, and if they fixed the banking system, all would be fine. But the banking system and the mortgage problem were symptomatic of some deeper problems, and evidently they still haven't recognized those deeper problems.
On the one hand, I loved being a banker. I loved how numbers could tell a story and how you can invest in ideas and see them translate into products and services and create jobs. What I didn't like, particularly where I was working in Brazil during the debt crisis of the early '80s, was how the poor were excluded from the banking system. I made the decision to try and experiment with whether we could use the tools of banking to extend the benefits of the economy to the poor.
In the North, neither greenbacks, taxes, nor war bonds were enough to finance the war. So a national banking system was created to convert government bonds into fiat money, and the people lost over half of their monetary assets to the hidden tax of inflation. In the South, printing presses accomplished the same effect, and the monetary loss was total.
So: if the chronic inflation undergone by Americans, and in almost every other country, is caused by the continuing creation of new money, and if in each country its governmental "Central Bank" (in the United States, the Federal Reserve) is the sole monopoly source and creator of all money, who then is responsible for the blight of inflation? Who except the very institution that is solely empowered to create money, that is, the Fed (and the Bank of England, and the Bank of Italy, and other central banks) itself?
American money was never more sound, or banking more free, than 200 years ago. Since then, it's been a long steady decline from the gold standard and competitive banking to our Fed-run system of inflated paper currency, deposit insurance, and perpetually shaky banks on the dole.
Out of the bitter experiences of the panic of 1819 emerged the beginnings of the Jacksonian movement, dedicated to hard money, the eradication of fractional reserve banking in general, and of the Bank of the United States in particular.
Monetary reform, if it is to be genuine and successful, must sever money and banking from politics. That's why a modern gold standard must have: no central bank; no fixed rations between gold and silver; no bail-outs; no suspension of gold payments or other bank frauds; no monetization of debt; and no inflation of the money supply, all of which have proved so disastrous in the past.
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