The Federal Reserve System

The opposition in this debate is focusing on constitutional issues. When a bill is passed by Congress, signed into law by a President, and up held by the Supreme Court, that law is constitutional regardless of the morality, the examples that will be sited again of Dred Scot, Plessy v Ferguson, Citizens United, and Obamacare are all examples of immoral laws that were/are constitutional. Another key point the opposition is getting wrong is the deferences between money, currency, and legal tender. The Federal Reserve does not have any responsibility with money, it only deals with legal tender. Legal tender is not addressed in the US Constitution, thus Congress can use any of the three clauses stated earlier to do anything that a President will sign. As the opposition states "If I did that [create legal tender from nothing] my check would bounce and I would go to Guantanamo Bay." Almost correct, if you did it as a banker that is a member of the Fed it is fine, banks create tender everyday. Plus, counterfeits don't go to Gitmo that is saved for the most dangerous terrorists that threaten America. The next point about the Fed is it role as a vanguard against economic activity. Moderates economic swingsAs for economic swings, when comparing pre-WWI and post-WWII, the Fed has done no worse than earlier systems. Today's Fed staffed with the best economic minds in America stand a vanguard from the excesses of capitalism.One of the Fed's most important roles is control of the economy using macro-economic tools. The Fed gained this authority by passage of the Humphrey""Hawkins Full Employment Act of 1977. In the 1970s, after a generation of economic indoctrination, macroeconomic planners believe that if given the authority unemployment and stable prices could be controlled with monetary policy. Macro-economists point to the Phillips curve for justification. Simply put, the Phillips curve correlates inflation rate to unemployment rate in the US economy .http://www.econlib.org... .The below graph shows the curve in action:http://www.debate.org...As anybody can see, a clear tread and predictable tread line. Thus macro-economists can control the unemployment rate by managing the inflation rate. With management of the inflation rate America gains a bonus of stable prices. The Fed, using macro-economic analysis concluded that a 2% inflation rate was the Goldilocks of inflation, not too much and not too little. Some uneducated and unenlightened might state, stable prices mean little change, but how little they understand. If prices stayed constant or even fall that is not good for an economy. If people can hold currency without penalty then people will do so, this will lead to currency hoarding. Savings is good for people but hoarding is something that must be prevented. Hoarding leads to a reduction is spending which is need to keep the GDP growing. Without GDP growth politicians must answer why there is a recession. For these actions to be effective, the rest of the world must understand that international trade is to be conducted in US dollars. In other words, US currency hegemony. This hegemony has been enforced by US diplomatic and military actions. The first step was the Bretton Woods agreement just after WWII. Then upon Nixon's executive order removing America from a semi gold standard, the petro-dollar was born. With all crude oil international trades done in US dollars, America created a financial system the rest of the world must obey.In the opposition's initial statement, it is pointed out that $9 trillion was issued by the Fed in secret. The Fed must operate in secret, America's banking system is fragile. If the Fed had stated the who's and Whys in this creation of legal tender the system would have collapsed due to lack of confidence. America's fiat money system is extremely fragile, every bank is by definition bankrupt because they can not meet all depositor liabilities. This is the great trick of double entry accounting, for a bank, a deposit is a liability and a loan is an asset. A loan is offset with creation of a reserve, thus legal tender is created for nothing legalized by Congressal action. If a non-authorized institution did the same action, people would go to jail. If a government makes it legal then citizens must comply. The Fed protects American from economic swings thus ensuring that people maintain their place in society.