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BERNAKE OR THE FEDERAL RESERVE?

Warren Mass
Submitted by Charleston Voice
Nov. 17, 2005

"Don't follow the bouncing ball....look to where it's rolling."....Charleston Voice, 2005

Instead of debating the pros and cons of Ben S. Bernanke, we would be far better off if members of both houses of Congress debated the pros and cons of the entire Federal Reserve System.

The name Ben S. Bernanke has been in the news since President Bush nominated him to succeed Alan Greenspan as chairman of the Federal Reserve. Some consider Mr. Bernanke’s credentials as impressive: He is former professor at Princeton University, and was a Fed governor from 2002 until earlier this year. When members of the Senate discuss Bernanke’s confirmation, there are likely to be questions from both sides of the aisle about his economic philosophy, but it is conceded that he faces no substantial opposition to being confirmed. A New York Times article on November 14 quoted Rhode Island Democratic Senator Jack Reed as saying of the Bernanke nomination: “It’s noncontroversial…. It’s hard to argue about his qualifications.”

There are several reasons for the dispassionate interest among members of the Senate and their constituents regarding the Bernanke nomination, especially in contrast to the upcoming Senate battle over the nomination of Judge Samuel A. Alito Jr. to the Supreme Court. In an era where the high court has become increasingly embroiled in high-profile social issues, the Federal Reserve deals in the world of economics — a little understood science that excites only such level-headed individuals as economists, CPAs, and actuaries. Financial aficionados seem to prefer briefcases to picket signs.

However, the general public should be more passionate (or at least interested) in who is in charge of the Federal Reserve system. Considering the longevity (14 years) of members of the Federal Reserve’s Board of Governors, and the vast control over our nation’s economy they exercise, their power surely rivals justices of the Supreme Court. It may even exceed it, if we consider that Mayer Anselm Rothschild (1743-1812), founder of the powerful European banking dynasty, once stated: “Give me control of the money, and it does not matter who makes the laws.”

During the Senate’s confirmation hearings, senators will likely demonstrate their "diligence" by asking all of the prerequisite questions such as these posited in the Times article:

How would inflation-targeting work, and would it be more rigid and formulaic than policy making under Alan Greenspan?
Is Mr. Bernanke a hawk or a dove on fighting inflation?
Would Mr. Bernanke lend his authority to Mr. Bush's goal of making his tax cuts permanent, even if that increases the federal budget deficit?
However, if senators are truly interested in rendering diligent service to their constituents, they will ask a different set of questions — and propose legislative solutions to address the same. Consider these, for starters:

• If a central bank is so desirable and essential for our governance, why did the Founding Fathers not establish one at the inception of our Republic?

• Why should we give control of our nation’s money supply to seven individuals who make up the Fed’s Board of Governors?

• When our Constitution guarantees a “republican form of government” for our states, why did Congress establish an institution in 1913 that was listed by Karl Marx in the Communist Manifesto as being essential for a successful revolution and the conversion of any nation into a socialist state?
The fact that these questions may appear as strange or novel to most Americans demonstrates only that the establishment opinion cartel has largely failed to educate our citizens about the true nature of the Federal Reserve system, and the role it has been given in converting our nation from a constitutional republic to a socialist democracy.

One of the best treatises exposing the true nature of the Federal Reserve ever written was “The Federal Reserve System” by Hans Sennholz, published in American Opinion magazine for April 1958. (Sennholz was generally considered to be one of the two or three most brilliant disciples of Ludwig von Mises, the celebrated economist.) Though it is impossible to adequately summarize the fine points of that brilliant essay here, here are a few key points worthy of consideration:
• The “reformers” who created the Federal Reserve system pointed to the Bank of England and the German Reichsbank as examples to emulate. However, our Federal Reserve was patterned after the Reichsbank, which possessed what is termed elastic (easily inflatable) currency.

• The volume of paper currency offered to the Federal Reserve for rediscount — which is then fed into the economy in the form of currency and credit — is determined mainly by the rediscount rate which the Federal Reserve itself sets.

• The Federal Reserve System is authorized to buy or sell certain securities in the open market — which is an important method of central credit control.

• One of the most powerful instruments of credit control in the hands of the Federal Reserve System is its authority to change the reserve requirements of its member banks.
In case the above is too much in the realm of economic jargon for the average reader, we can take note of what Dr. Sennholz concluded this means for America: “The Board of Governors of the Federal Reserve System have the clear power, through the political results of their economic controls, to make this a socialist nation…. The beautiful fallacies of socialist ‘central planning’ are being substituted for the hard, but lasting and productive, truths of a free market, and the Federal Reserve System supplies the magician’s cloth under which the substitution is made…. The simple truth is that without the Federal Reserve System there can be no continuing march towards socialism, and with it there can be no free economy. That is why the adherents of liberty and capitalism cannot rest until the Federal Reserve System has been abolished.”

When the Federal Reserve Act was passed by both Houses of Congress on December 22, 1913, the great American statesman (and father of the famous aviator) Charles A. Lindbergh Sr. addressed his colleagues in the House of Representatives:

“This act establishes the most gigantic trust on earth .... When the President signs this act the invisible government by the Money Power, proven to exist by the Money Trust investigation, will be legalized .... This is the Aldrich Bill in disguise .... The new law will create inflation whenever the trusts want inflation....”

Instead of debating the pros and cons of Ben S. Bernanke, we would be far better off if members of both houses of Congress debated the pros and cons of the entire Federal Reserve System, and then voted to reverse the damage that Congressman Lindbergh warned about, so many years ago.


© Copyright 2005 American Opinion Publishing Incorporated

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