Keeping The Federal Reserve

In conclusion, there is a pressing need to abolish the federal reserve and central banks in all countries immediately. This institution, more than any other, is responsible for so many of the problems we face today. If a nation's money supply is sick, then the entire health of the economic system is sick. Inflation is evil. It promotes consumption instead of savings. It's a tax on wealth - and a hidden tax, a tax that people can't really see. Yet every day we are robbed of our wealth by a government which is so avaricious it will stop at nothing short of murder to ensure that it's tax slaves remain in compliance. http://en.wikipedia.org... The federal reserve prints money. No, not literally, my opponent is correct, that is the purview of the treasury department. As Rothbard explains in 'What Has the Government Done to our Money' http://mises.org... what the Federal Reserve is exactly this. The Fed sets a reserve / deposit ratio of 1:10. This means for every dollar on deposit the bank only has to have 10% in reserve at the bank the rest they can lend out to people. The federal reserve increases the money supply (colloquially referred to as printing money) by buying assets on the market - almost invariably government bonds. This is the purpose of a central bank, to create and then loan money to the government, to finance deficit spending and amongst other things - wars. The government creates bonds and then orders the central bank to buy them. The whole thing is done by computers and credit expansion and the pyramiding of reserves. If you look @ this chart : http://images.mises.org... from this link http://mises.org... you will see that the money supply closely follows bank credit expansion. Ultimately, my opponents argument rests upon the age old hypothesis that we can create prosperity by printing money (strangely he argues both that the federal reserve does not print money, and that this printing of money is critical to the economy). This is simply not so. You cannot create wealth by printing money. Wealth is created through savings, channeld into capital, and the hard work of entrepreneurs and those who labour in the market economy. Printing money does not positive impact unemployment. The reason why people are unemployed is not because there isn't enough money, but rather because the government has made it a crime to employ large swathes of the potential work force at their market rate. The sickening thing is these labour laws target precisely those who are the most vulnerable and who need our help the most - low skilled workers. Just look at unemployment statistics for teenagers after the introduction of the minimum wage (teenagers are a representation of low skilled workers). Friedman explains : http://www.youtube.com... If raising the minimum wage is a good idea, why raise it just a few dimes more? Make it $50. Then we'll all be rich! Except we won't, we'll all be out of work, because you made it illegal for employers to hire us all at our market rates. The minimum wage makes it a crime to employ anyone with a low skill set. This includes teenagers, but also people who have been out of work for a long time, homeless people, people with criminal records, the disabled, etc. There is a market price for the work that all these people can do - even if it is only a few dollars an hour. Take the example of a homeless man, with a drug habit. It's obvious he cannot work even the most basic minimum wage law. But what about hiring him to hold a sign, or some other very simple task which would pay almost nothing. A job like this might teach him valuable work skills, the meaning of an honest living, give him some pocket money. It might just be his only road to recovery - and the minimum wage made it all illegal. Or someone with a criminal record. Who on earth would ever hire this person when there are plenty of non criminals to hire. But what if the man was willing to work for much less? Then maybe some employer would take a chance on him, let him earn an honest living, and help him reintegrate with society. The free market does not collapse in on itself, as Marx claimed. We do not need the government to 'save' the economy. It's not a damsel in distress. Far from saving us from recessions, the fed is responsible for the boom bust cycle. Far from fighting inflation, the fed is the reason why inflation exists. We must abolish all central banks, fractional reserve banking, and this system of fiat money. But if the fed is not going to regulate the money supply, if we are not going to have money socialism, then what do we replace it with? A system of competiting currencies. Let the market decide what sort of money we'll use. Most likely gold will result and we'll all enjoy steady prosperity, with no more business cycles or the evil secret tax on wealth that is inflation.