The Fed

I think it’s only fair to say up front that I’m pretty unsympathetic to libertarianism as a driving economic principle.  In my view, the rhetoric of libertarianism conflates freedom from repression (a worthy goal) with freedom from responsibility to others (a selfish goal).  Policy issues such as eliminating income tax and ending government regulation of private industry make the phrase “anarchism for the rich”seem totally apt.  I knew that Ron Paul argued for, among other things, ending the Federal Reserve, but since I had no real interest in most of his platform I didn’t look into it much.

In the context of OWS, corporate manipulation of economic policy has come to the forefront and I’ve seen a lot of people (many of them Ron Paul supporters) proclaiming the end of the Federal Reserve as the solution.  I figured it was worth trying to at least understand the argument in order to figure out whether it makes sense to me.

For better or worse, my starting place was this video of a speech against the Fed at OWS, which got a lot of attention around the internet a couple weeks back:

As a relative layman to arguments for and against the Fed, my first response is that this speech seems to attribute a lot of problems (the demise of American manufacturing, the decline of the middle class, expanding militarism) to the Federal Reserve system without providing too much direct explanation as to the nature of that connection.   There’s an awful lot of rhetoric here claiming that it is the Fed which has produced our current state of income and wealth disparity, but this claim is by no means intuitive and he offers little in the way of practical explanation.  Also, his attachment to the value of gold seems a bit fetishistic and hearing people yell about “states’ rights” sets my teeth on edge.  To be fair though, this one speech can’t be expected to represent the entirety of the argument to end the Fed.  So I looked around a little bit more to find explanations for why the Fed might be the root of all our troubles.

Admittedly, I first had to do some remedial work to try to get at least a bit of a grasp on how the fed actually works.  This is a booster-ish and highly cheesy video, but it seems to offer a baseline introduction:

From there, I tried to look at some of the claims that Paul himself is making.  In this 2009 interview, he talks about ending the Fed as a means to both prevent printing of “fiat currency” in order to fund war and monetize the debt related to welfare, both of which he identifies as destabilizing to the economy:

I think I get the basic logic.  If you believe, as Paul does, that government (and especially the Federal government) doesn’t do almost anything well and that its power should be curtailed as much as possible, then ending the Federal Reserve system and returning to the gold standard provides a way of cutting back substantially on what the government is able to pay for.

However, if your major concern is not limiting the power of the government, but rather realigning its priorities to be more in line with the interests of the people as opposed to corporate interests, then the Federal Reserve seems less like a target per se and more like a tool that can be used or misused.  For example, you could argue that bailing out Wall Street instead of mortgage holders is unethical and points to undue corporate influence, but that acting as a lender of last resort to prevent bank runs actually helps enure access to capital for anybody with a bank account.  It seems at least feasible that the manipulation of currency value could be undertaken in a way that benefits the 99%.  I’m sure many economists would argue that it has.

I think this gets me back to my problem with economic libertarianism.  It seems to me like the central concern of this philosophy is not ensuring the highest standard of living for the largest number of people, but rather a stripping down of governmental so that we can reach some kind of pure, self-regulating free market meritocracy.  But of course, this utopia breaks down as soon as you acknowledge ongoing systematic oppression on the basis of race, gender, class and so on, or even if you just admit that human beings are often willing to exploit one another in absence of a system that prevents that exploitation.

I’d really like to have a conversation about this with somebody who supports ending the Fed and has a real interest in social justice.