Rooted in Reason: Nurturing the Seeds of Liberty

And what does the Federal Reserve actually do again…? by grassroothawaii
July 14, 2011, 4:54 pm
Filed under: Economy | Tags: , , , ,

By Cannon Brooke

The Bureau of Labor Statistics’ recent jobs report echoes a frightening trend about the dismal state of our economy. This undoubtedly, reinforces our concerns how the market is beyond the foresight of this administration’s experts.  According to a report newly released by the Heritage Foundation, the United States is facing the weakest recovery in the post-World War II era. Even worse, this is happening despite that the recession “officially ended” back in June 2009.

At this point, surely one would think that we would be questioning the purpose of the Federal Reserve. After all, the objective of the Federal Reserve is to maximize employment through its policies of lowering interest rates during recessionary times. However, despite its policies being systematically employed numerous times over the past decades, why has it not worked?

Austrian economists such as Friedrich Hayek and Ludwig Von Mises would explain this problem by focusing on the foremost folly of central economic planning, the knowledge problem. The economic calculation problem exists because the market is far too complex to be comprehended by most people, consequently, and is left predicted and manipulated by a few specialists whom claim to understand the inner workings.

But this is exactly the problem.

The complexity of the market and the inherent nature of it having no structure and constantly shifting make it difficult for the Federal Reserve’s policies to be advantageous. An example of this can be seen, when the Fed lowers interest rates and attracts investment to one sector of the economy that would not typically see as much investment in a normal environment, leading to malinvestment.

A perfect illustration of this happening is the recent housing price bubble. Since interest rates were kept artificially low, it subsequently attracted many new investors. This in turn, created jobs for the real estate industry and employed many.  The problem is the market became over-expanded and many people could not afford their investment – popping the bubble.

So the Federal Reserve’s policies worked in the short run, creating jobs and propping up the economy – but only in the short run.

The Federal Reserve’s goals are contradictory and have a long history of failure. How does artificially stimulating one sector of the economy benefit everyone? And how does the inflationary policies of the Fed create a productive economy and maximize employment by devaluing our money?

With the real unemployment rate just reaching a staggering sixteen percent, we should all be asking ourselves – why do we even have the Federal Reserve?


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Another question we might ask is, “Why do the people of any sovereign country, which has the power to define and issue its own currency without borrowing it, choose to borrow it at interest from a private banking cartel and create a national debt?”

What if there were NO national debt? There would be no interest payments to make to the Federal Reserve and other international bankers who theoretically purchased it.

The national debt is completely imaginary. It consists of “loans” of printed paper and imaginary entries in a computer program, the value of which is based solely on the belief of the people that they can exchange if for something of value.

The paper is actually printed by the Bureau of Engraving and Printing and sold to the Federal Reserve for distribution through the banks. It has no intrinsic value. Nothing of value was ever loaned. Therefore, there is nothing of value upon which to pay interest.

Learn the truth about the Federal Reserve and about the alternate currency solution that will keep our State economy strong through the coming hard times.

The American Dream
Web site:
Pass Code: 2011-FreedomForce
Click on the Money link at the top of the page.

Comment by Mike Higgins

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