Should We End the Fed?

What would it mean to "end the Fed"? Professor Larry White says that in order to know the effects of such a measure, we must first understand the role of "the Fed".

The Federal Reserve is the central bank of the United States and the institution at the center of the nation's monetary and banking systems. It has five main functions, including controlling monetary policy. Could the United States even survive without the Federal Reserve?

In order to answer this question, Professor White examines countries throughout history that did not have an established central bank, including Scotland, Sweden, Switzerland, and Canada. Hong Kong, he points out, still does not have one. So who performs the functions of a central bank in these countries?

Professor White cites private institutions, including clearing house systems, banks, and financial companies, as the main actors in the monetary systems of countries without a central bank. Ultimately, Professor White concludes that the Federal Reserve is not necessary. Evidence shows that nations can survive without a central bank. What the Federal Reserve does well can be done even better by private institutions, and the institution is capable of serious errors.

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[nedyarbnexus]

we shouldn't just end the fed, we should build a time machine and go back to 1913 and stop if from EVER being created.

[GodnLovenPeace]

Thank you Woodrow "Sellout" Wilson for over a century of struggle!

[alanhowitzer]

The Fed should never have been allowed. Dissolve the Fed and prosecute those running it and responsible for its existence.

[LearnLiberty]

A Canadian coffee shop has opened a Bitcoin ATM, becoming the first business to do so. Do you use Bitcoins or other alternative currencies? Watch our video featuring Professor Larry White, in which he recommends taking away monopoly control of money from the United States Federal Reserve System.

#federalreserve #libertarian #liberty #economics #bitcoin  

[DavidJGillCA]

The FED is a federally chartered corporation. It is neither a public agency nor a private corporation. The Congress can alter or revoke the FED's charter at any time.
The shareholders in the bank are American's many banks who are required to buy a certain number of shares that they may not sell. They are paid a small dividend annually. The VAST majority of FED earnings are paid to the US Treasury.
Those are the facts.

[mohammadmursalin]

The more appropriate question is "Can you ever end the FED?"

[Tyjet]

All organizations audit themselves... It's called internal auditing. Outside (External) auditors are primarily used to ensure that internal auditors are doing their jobs properly.

[hikari_no_yume]

"Scotland, Northern Ireland and Hong Kong", and the map highlights..Scotland and the North of England, The Republic of Ireland and Taiwan. Well done!

[Nawor]

A very thought provoking video, and it has served to increase my interest in getting an economics minor.

[GregoryTheGrster]

The Fed also has one more function: to fund Congress's profligacy.

[TheBalancedAmerican]

"I'm annoyed that there isn't more to learn"

The first stage of wisdom is knowing what you don't know. If you ever arrive at a point were you believe there is nothing more to learn, then you can be assured that you are no longer learning. There will always be those who know far less than you, but there will also be those who know far more. We must recognize the value of new information, and our challenge is reconciling the apparent contradictions.

With a whole view, you'll see no contradictions ;)

[JoshuaStowers]

I would never have agreed with this guy before I got my degree in international econ. Now, I agree 100%. I am torn on the matter though, because the US dollar's strength is highly dependent on its' ability to hold the #1 spot. If foreign governments have no faith in a US reform, they may decide to hold their reserves in some other currency. That could cause some pretty serious issues.

[Pyrrhic.]

I would argue that the crash was also caused by

1. Deregulation of the financial system
2. Lowered long term interest rate through Globalization
3. Tax Cuts for the wealthy Americans, allowing them to speculate
4. Lack of understanding in the International Financial System

and finally lower interest rates by the Fed. (Although even if Fed have kept interest rates up, globalization would have lowered interest rates anyways.

[LearnerFunLifePersona]

Over time, everything moves towards centralization.

[panpiper]

I completely agree. The fellow to whom I responded asserted that if we went to a gold standard, that the 'value' of gold would actually fall even while demand for it (and therefore it's price) went up. I meant to point out that this was essentially a contradiction in terms. Value is certainly subjective. But if the price is going up with the supply essentially stable, it is because people are putting a greater value on it which results in increased demand for it.

[Runner]

So I see the 4th role for the Fed, lending of last resort where the Fed lends money to the banks when cash runs low.

One thing I don't get is why did the 780 billion dollars given to the banks during the financial crises was used by the American tax dollars? It should have been lent from the Fed, not from the people who suffered from the banks!

[TheBalancedAmerican]

You're partially correct. The Fed did pursue a silly deflationary policy during the depression, which made it much worse. But the US didn't have a stable financial system before the Fed. Indeed, there were dozens of severe crashes in the 19th century. The enemy is reserve lending, not the Fed. The best you can argue is that the Fed exacerbates the problem.

The Federal Reserve System is not the house of cards, it is the response to the house of cards, which is Fractional Reserve Lending. =/

[brandonwarscbin]

yes the FED is privately owned, yet its rather peculiar, no one is exactly sure who owns the fed, its leader is appointed by the government, and it was createad by an a congressional act in 1913, thats not how most private institutions are created or run. Pretty fishy if you ask me.

[MAMP]

1:10 is a really important and carefully chosen statement. Notice he says "expand the amount of money in the economy faster or slower".

This is crucial because it tells us that the author of this presentation understands that the money supply is set to expand perpetually within the confines of the current monetary system.

[TheBalancedAmerican]

Great Lectures, Thx! =)

My questions for Mr. Selgin are:

1)In a free banking system, how are the advantages of a common unit of exchange mitigated. I can take a dollar anywhere in the world and exchange it for goods, but a promissory note from a local bank holds less convertibility. My point being, i believe it was natural for a free-market system to develop a common currency because it enables more efficient trade.

2) Free banking, or any reform, means nothing unless we end reserve lending.