Like the "No Pakistanis" version of "Get Back," the "Imagine no Bernanke" verse from "Imagine" has been lost to history. But the always excitable list-maker Michael Snyder helps fill in this gap in our cultural history by imagining no Federal Reserve Bank.
Snyder lists ten ways the U.S. economy would be different had the Fed had not been created 98 years ago. Some of them aren't totally convincing. I'm not sure for example why the absence of a Fed would eliminate the absurd annual "debate" over raising the debt ceiling. (I wonder how the current one will turn out?) But some of these are worth giving a think:
#4 If the U.S. government could issue debt-free money, it is conceivable that we would not even need the IRS. You doubt this? Well, the truth is that the United States did just fine for well over a hundred years without a national income tax. But about the same time the Federal Reserve was created a national income tax was instituted as well. The whole idea was that the wealth of the American people would be transferred to the U.S. government by force and then transferred into the hands of the ultra-wealthy in the form of interest payments.
#6 If the Federal Reserve did not exist, the big Wall Street banks would not have such an overwhelming advantage. Most Americans simply have no idea that over the last several years the Federal Reserve has been giving gigantic piles of nearly interest-free money to the big Wall Street banks which they turned right around and started lending to the federal government at a much higher rate of return. I don't know about you, but if I was allowed to do that I could make a whole bunch of money very quickly. In fact, it has come out that the Federal Reserve made over $9 trillion in overnight loans to major banks, large financial institutions and other "friends" during the financial crisis of 2008 and 2009.
#7 If the Federal Reserve did not exist, it is theoretically conceivable that we would have an economy with little to no inflation. Of course that would greatly depend on the discipline of our government officials (which is not very great at this point), but the sad truth is that our current system is always going to produce inflation. In fact, the Federal Reserve system was originally designed to be inflationary. Just check out the inflation chart posted below. The U.S. never had ongoing problems with inflation before the Fed was created, but now it is just wildly out of control….
#10 If the Federal Reserve had never been created, the American people would be much more free. We would not be enslaved to this horrific national debt. Our politicians would not have to run around the globe begging people to lend us money. Representatives that we directly elect would be the ones setting national monetary policy. Our politicians would be much less under the influence of the international banking elite. We would not be at the mercy of the financial bubbles that the Fed has constantly been creating.
I can't show you all ten because violent eliminationist conspiracy theories like these are just the kind of thing that will make you shoot a member of Congress. Also because thinking about the history of central banking and the nature of money makes my head hurt. If Fed policy turns the currency into debt in some way that didn't apply before the Fed's existence, where did all the debt come from to run the Civil War, build the infrastructure of Ohio and purchase the Louisiana Territory during the on-again/off-again central banking days of the 19th Century? If the greenback were competing with the notes of private banks again, wouldn't bad money drive out good, in accordance with Gresham's law? Shouldn't the massive expansion of the monetary base be causing people to reduce their savings rates (rather than saving slightly more), since Say's Law argues against money hoarding? And what of Cole's Law ("The number of side options increases in inverse proportion to the price of the Blue Plate Special")?
My brief case for ending or at least auditing the Fed: It's not the conspiracies; it's the incompetence.