The Federal Reserve Should Be Abolished

Thanks for a great debate! My opponent has offered a shocking amount of apologism and defense for a system that is corrupt to the core and has no business wielding the power that it does. I am astounded that after all this evidence showing that an external body has the willpower to do whatever they wish with the nation’s money, creating debt and instability along the way while they rob the middle class with income tax, my opponent still sticks up for the Fed as a benevolent institution that acts in the best interest of the country. I’ll start out by rebutting many of his arguments presented last round. Even though it was ruled to not be a government agency, the Fed is "..... a separate corporation owned by commercial banks in its region. The stockholding commercial banks elect 2/3 of each Bank's 9 member board of directors…The Fed is not privately owned by malicious filthy rich bankers liek the Pro is trying to suggest” Isn’t that what the facts you just presented point to? Just because they don’t physically own it doesn’t mean that the bankers don’t exercise a significant amount of control over the day-to-day affairs of the Fed banks. Plus, these are “stockholding banks”, which essentially amounts to combined ownership by the commercial banks. The main point I make by bringing up the Lewis case is to demonstrate that the Fed is most definitely an unregulated agency, unlike what Con tried to suggest earlier. This complete lack of regulation lends itself to the stockholding banks having relatively unrestrained power to enact whatever policies they wish. The commercial banks have the power to elect the majority of each Fed branch’s board members. Common sense dictates that the banks will naturally select individuals who will serve the bank’s self-interest, which is usually at odds with what benefits the general citizenry. On the topic of regulation, I’ll bring up a glaring inaccuracy in one of my opponent’s points. He states that “Congress has the power to coin money and determine its value, the Fed does this for them because it is their job assigned to them by Congress.” First off, our money has no value since we have a paper currency backed by nothing. In the days of the gold standard, a dollar was 1/20 of a gold ounce, which is not the case anymore. Also, “coin” essentially means “print” in today’s system, which is the sole power of the Federal Reserve. Therefore, Congress has none of these powers. My opponent is trying to contend that Congress still technically has these powers just because they have delegated the responsibility to the Fed. If the Fed had some degree of regulation by Congress, then this argument might be valid. However, as the Lewis case determined, the Fed is so independent that it cannot be considered a federal agency. If Congress were to allow individual states to declare war (a power of Congress outlined in A1 S8) without having any say at all in the process, this would indeed be unconstitutional. The same principle applies to the Fed. Also, Con claims that I am trying to unfairly use the Great Depression to “prove him wrong” about the pre-Fed era panics. If he recalls, he stated in Round 2, “Imagine the bank closures of the great Depression happening once every ten years and that was what it was like prior to the Fed's creation.” I merely proved that this was a patently false claim with bank failure statistics. Indeed, none of the panics before the Fed ever approached the conditions of the Great Depression’s 5,000 failures, which occurred under the Fed after it had been solidly established. “The Con is trying to argue how the Fed was the sole cause of the Great Depression which is a glorified lie if Ive ever seen one…there are many other causes of the Great Depression…” So the opinion of a Nobel-prize winning economist (Friedman) is just a glorified lie? Plus, I never said it caused the Great Depression to initiate. I realize that all the factors you listed caused it to initiate. The Fed had nothing to do with it starting up. Friedman’s contention is that the Great Depression would have just been the Panic of 1929 if the Fed hadn’t made some poor monetary policy decisions that did nothing to control the rapid contraction of the money supply from bank failures. In other words, without the Fed’s existence, private clearinghouses could have done what the Fed didn’t do, and the worst economic depression in US history would have been much more mild like the panics before the Fed’s creation. Chairman Bernanke himself has accepted this explanation. The Great Depression disproves the notion that with the Fed in place, the US will automatically see more economic stability. We had the worst-ever crisis under the Fed’s existence, and are currently in the midst of a crisis that could surpass it. I also find it astounding that my opponent finds no objection to the immoral and secretive actions of the Fed. Not being able to question economic policy is something that fascist societies have possessed, but not the US. After all, the Fed’s decisions affect all of us. Why is it justified for them to have absolutely no transparency and accountability to the American people, under the guise that secrecy is necessary for them? Secondly, the massive conflicts of interest that I mentioned are clear examples of cronyism that were meant to help out Wall Street while Main Street suffered. To put the $16 trillion the Fed loaned out into perspective, that amount is more that the US total GDP during the previous year. For them to create all this money to bail out banks that had made bad decisions in lending is definitively wrong, due to the MASSIVE debt created by printing an amount of money that exceeds the GDP. There were alternative solutions, but the bankers who had so much willpower in the Fed didn’t want these solutions since they wouldn’t benefit them. Finally, the audit that I mentioned revealed vast amounts of AMERICAN MONEY being lent out to EUROPEAN banks. They have their own central bank: why should the US be put into debt in order to bail out banks that aren’t even in the US? Glaring injustices were revealed by this audit that the Fed didn’t want. Unfortunately for them, it has exposed their cronyism and unchecked power, aspects that only end up benefitting the elite bankers and CEOs on Wall Street. Regarding the interest rate graph, I never said that an increase in interest rates automatically leads to immediate depression. The graph does show a clear trend of major interest rate hikes leading to depression; sometimes the depression was just delayed slightly. Let it be noted that my opponent dropped the income tax argument. It seems that he has accepted that this gorging of hardworking Americans’ incomes goes only to serve a central bank that is infiltrated with banking interests rather than a prerogative to preserve economic stability. He also says that eliminating the Fed would force us to borrow even more money. This is unjustified and incorrect. If the Treasury were able to print interest-free US notes that belong to the US government, the debt could be paid off quite easily. Compare this to using the current system under the Fed, where the govt. must go into further debt every time it needs money. There are no positives to a system that facilitates oppressive income tax and a debt that is becoming mathematically impossible to pay off. Many cannot imagine life without the Fed, but there are numerous alternatives to ending its corruptive domination of the economic policy. Think about it: people could keep a larger percentage of their income, the government could pay off the national debt with interest-free currency, and the corrupt bankers of Wall Street would not have a stranglehold on monetary policy. We wouldn’t be free from economic cycles (this is a natural part of a true free-market society), but ending the Fed would not be the end of the world: it would merely be the end of mutant capitalism that has festered since its establishment.