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“Small Is Beautiful” Guy Hearts Fed

By on August 29, 2010 in Economics, Federal Reserve 1

Here’s a reply I just wrote to an email asking me where a certain person got the idea that the economy was in recession 40% of the time in the nineteenth century.  I am calling the person X, because he’s about the most uncharitable (and uncomprehending) antagonist I’ve ever faced — yes, even a genial guy like me has antagonists — and I’m all done dealing with him.

“I’d tell you where he gets it from, but my answer would be too crude.  X is a real estate agent who knows as much about nineteenth-century economic history as any other real estate agent.  (I am not saying real estate agents are ignorant, you understand, but that they tend not to be experts in this highly specialized area.) Yes, there were recessions, but contemporaries correctly blamed them on excessive issue of bank credit, often pushed by federally chartered national banks.  Austrians oppose this kind of activity in the first place, so X proves nothing by citing these panics.  Rothbard shows in his book The Panic of 1819 (Columbia University Press, 1962) that many people decided, in the wake of that panic, that the best policy was 100% reserve banking in a completely private system.  We never got that.  That system, say many Austrians, is the only one that would put a stop to the boom-bust cycle. Continue Reading →

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The Fed Appoints Three New Drones. Hooray

By on July 20, 2010 in Economics, Federal Reserve 1

On Bloomberg, Jim Grant is asked how he feels about the three yes-men about to be appointed to the Fed.  Most guests would offer a few empty statements about the great qualifications of our new overlords.  Grant, on the other hand, gives a reply that only a few people in the world would give — namely, what the heck does it matter?  What will change with the addition of these people?  Absolutely nothing, as usual.  So why pretend to care, or that any of it makes any difference?  (Thanks to Bob Murphy.)

cross-posted from TomWoods.com

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States to Congress: Print More Money

By on June 22, 2010 in Economics, Federal Reserve 2

Writes Ryan W. McMaken

The states (and the local governments) are facing crushing deficits and declines in tax revenues. Unlike the feds, the states can’t simply monetize debt by having the Fed purchase enormous amounts of new debt.

But that doesn’t mean the states can’t ask Congress to run up some new debt for them. The states are now begging the feds for free money in the form of Medicaid “stimulus” funds in the hope of closing huge budget gaps. But fortunately, Congress presently lives in fear of the November elections. States will need to come up with new strategies.

During The Great Depression, they turned to legalizing and taxing booze. They’d be wise to think similarly this time around.

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Regional Fed Bank Presidents Blocking Transparency

By on May 11, 2010 in Economics, Federal Reserve 2

State Representative Paul Opsommer (R-DeWitt) criticized regional Fed bank presidents for their testimony on Capitol Hill yesterday, saying their efforts to block inquiry into Wall Street bailout details continue to stymie needed financial reforms.

“We continue to see strong bi-partisan efforts to audit the Fed at both the state and federal level that is being continually ignored,” said Opsommer. “In Michigan we continue to work on a variety of important budgetary issues that are being impacted by actions taking place at the federal level that we are not being allowed to inspect even after the fact.”

The Michigan budget continues to receive a higher proportion of its revenue from federal funds, yet the mindset that this is free-money is a myth that is coming home to roost in Michigan.

“The fiscal year 2001-2002 monies we received from the federal government represented 27.5 percent of our revenues,” said Opsommer. “That went over 30 percent in FY 2004-2004, over 35 percent in FY 2008-09, and with the latest figures coming in at 38 percent, I am concerned it won’t be too much longer until a full 40 percent of our revenue comes from the federal government. Pressure to continually match such money means that federal dollars are driving the Michigan budgetary process in a manner where Michigan priorities only receive whatever money is left over.”

Opsommer introduced HCR 36 in December of last year in an attempt to lend support to audit the Fed. The concurrent resolution is currently in the Banking committee.

“Unlike the federal government, we have to have a balanced budget,” said Opsommer. “As we work to craft budget solutions here we are increasingly handcuffed at the local level by federal policies that rely on the printing of money and the borrowing of foreign debt. More people need to wake up to the fact that the connection between what happens in Washington and what we can do in Lansing increases a little bit more everyday.”

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Jefferson, the Fed, and the Tenth Amendment

By on February 10, 2010 in Constitution, Federal Reserve 2

end-the-fed-signIn one of the many arguments Thomas Jefferson had with Alexander Hamilton in the first administration of the newly found republic, under President George Washington, Jefferson used these words to describe why Hamilton’s plan for a federal bank under private management was a bad and unconstitutional idea:

“I consider the foundation of the Constitution as laid on this ground”: that “all powers not delegated to the United States by the Constitution, nor prohibited to it by the states, are reserved to the states or to the people.”…

Jefferson went on to argue: “The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States by the Constitution. They are not among the powers specially enumerated…” “If such latitude of construction be allowed to this phrase as to give any non-enumerated power, it will go to every one, for there is not one which ingenuity may not torture into a convenience in some instance or another.” Simply stated; Ignore the enumerated powers and there are no enumerated powers, the sky is the limit to expanded federal government.

This is the foundation of the “implied powers” argument used throughout history to ignore the true intent of the constitution.

How prophetic Jefferson was, and how we see over the years the federal government’s quest for power has given us a government that Hamilton always wanted, a government of an elite class of men with the power over the common man. My words, not his; his sentiment, not mine.

Jefferson fought desperately to stop what today is the Federal Reserve System. If Jefferson were alive today he would want to end the fed. Giving up the federal treasury to be run by “independent and private” interests in his eyes was a recipe for disaster. And the disaster is now upon us.

Jefferson accused Hamilton of “excluding popular understanding and inquiry.” He argued the system of banking and credit devised by Hamilton was so confusing no man including the “president or congress should be able to understand it, or control it.” Which he believed gave Hamilton a scheme to enrich himself and his cohorts within the system Hamilton devised.

These arguments between the two founders were the foundation of a two party system. Not the one we have today but it put people in two “camps”; federalists and republicans with a small r. The Republican Party of yesterday is in modern times what became the Democratic Party. The federalists were the big central government supporters that had the rich, wealthy, and British sympathizers behind it.

How times change but one thing remains true; the principles of our constitution are the key to our recovery and a prosperous future. If we listen and learn about our history and great men like Thomas Jefferson we can consider the paths ahead by using the great understanding that he had of government, to build our future.

He loved the constitution and it was he and Madison that promised the Bill of Rights to encourage the states to ratify our Constitution. It is time to revisit our constitution and our Tenth Amendment in particular. That is, if we want a prosperous future and one that restrains the federal government from intruding on out state and individual rights.

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