Ron Paul’s End the Fed 7

I finished Ron Paul’s End the Fed.  In my latest reading, Paul contends that the monetary and banking problems of the nineteenth century, which were prior to the Federal Reserve, were due to government policies, such as “periodic suspensions of payment, inflationary wars, crazy price-fixing rules under the bimetallism system, and other forms of debt finance”, and that the free market banking system from 1830-1860 was “remarkably stable and safe, with no widespread fraud”, contrary to pro-Federal Reserve propaganda (pages 190-191).  Paul wants a situation in which “Markets are self-regulating, responding to the wishes of consumers” (page 190).  And, on page 206, he even proposes that we put “the power of free enterprise to work in the area of choosing which money is best”, which may mean that he supports people being allowed to choose their own money.  On the page before, he praises the days when there were “no restrictions on private minters”.

I read a couple of pro-Federal Reserve items.  One thing that I read was by economist Edward Flaherty, who was criticizing G. Edward Griffin’s anti-Federal Reserve book, The Creature from Jekyll Island.  Flaherty argues that each state having its own bank was problematic (due to such things as counterfeiting and instability in the money supply) as well as tells the tale of how the Banking Panic of 1907 led to the creation of the Federal Reserve.  Flaherty also states that “Conspiracy theorists have long viewed the Federal Reserve Act as a means of giving control of the banking system to the money trusts, when in reality the intent and effect was to wrestle control away from them.”  You can read Flaherty’s article here, and Griffin’s response to Flaherty here.

Second, I read a comic book talking about the origins of the Federal Reserve.  There are other Federal Reserve comic books that I may read in the future, and I actually learned about them from Ron Paul’s End the Fed.

In what I read (I read one comic book in its entirely, and only part of another one), some things that I read elsewhere were reinforced, and some things were explained a little more clearly.  I referred a couple of posts back to Paul Krugman’s argument that the gold standard was faulty because you cannot control the supply of gold, and so basing the dollar on gold can be unpredictable.  One of the comic books said that the supply of gold and silver expanded at times due to mining and trade, and that there were other times when gold left the country due to trade.  I think that the comic book was arguing that gold lost its value as its supply increased, bringing about inflation, but that deflation resulted when it was scarce.  Gold was having an effect on prices, but there was really no way to control its supply.

Another comic book explained how increasing the money supply lowers interest rates, which is something that I’ve been wondering about.  When there isn’t as much money to go around, banks want to hold on to what they’ve got, and so they’re reluctant to lend it out.  Consequently, they charge high interest rates.  But when there is a lot of money to go around, they don’t have that problem, and so the interest rates are lower.

One of the comic books made the point that the Federal Reserve is independent of politics.  But Ron Paul would disagree with that claim, for, on pages 115-116, he says that Arthur Burns as chairman of the Fed pulled some monetary stunts in an attempt to get President Jimmy Carter to reappoint him.  Paul also argues that one reason that the Federal Reserve exists is to support big government—-to provide money for government programs and wars, and also to use inflation as a means to solve the debt problem (since, as I said in an earlier post, what was a lot of money when you borrowed it becomes not-so-much-money when there is inflation).

I have much to learn about economics.  But I enjoyed reading Paul’s book and writings in favor of the Federal Reserve because that helped me to learn more.  My conclusion, if I have one, is that there are strengths and weaknesses to any system.  That’s true with the Federal Reserve, and it was most likely true before the Federal Reserve.  There has to be some legitimate reason for an institution to come into being, otherwise it would not be sold as an idea.  But I would not be surprised if power-plays were (and are) a part of the equation, as well.

About jamesbradfordpate

My name is James Pate. This blog is about my journey. I read books. I watch movies and TV shows. I go to church. I try to find meaning. And, when I can’t do that, I just talk about stuff that I find interesting. I have degrees in fields of religious studies. I have an M.Phil. in the History of Biblical Interpretation from Hebrew Union College in Cincinnati, Ohio. I also have an M.A. in Hebrew Bible from Jewish Theological Seminary, an M.Div. from Harvard Divinity School, and a B.A. from DePauw University.
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