Saturday, November 9, 2013

Ideas Created The Federal Reserve...Ideas Can Get Rid of It

By, Chris Rossini

The Washington Post's Wonkblog, which can be counted on to defend every government mischief imaginable, reports on an "all-star economic conference" that took place in DC. Whenever you hear of an "economic conference" in DC, it can only mean trouble. The real economic conferences take place in Auburn, Alabama.

In the DC conference, the King of the "all-stars" -- Fed Chairman Bernanke -- graced the stage, and would provide a history lesson for all of the attendees. Bernanke described the similarities between the Panic of 1907, and the Panic of 2008.

The 1907 panic was created by fractional-reserve banking. When the bank runs got underway, and panic set in amongst the public, JP Morgan orchestrated the bailouts and the "liquidity" to "save the system". Remember this was pre-Fed.

The 2008 panic was also created by the fractional-reserve banking system -- along with -- the central banking counterfeiter that now exists. The bailouts this time around were provided by "The Hero":

Before we go any further, a few things have to be understood. First, both in 1907 and 2008 the banking systems were dishonest and fraudulent. The situation in 1907 is actually preferable to today because, back then, gold still provided a check on the bankers. In 2008 (and today) there are no checks. It's basically unlimited power for the bankers to finance whatever they want (until economic law shuts them down eventually).

Next, bailouts were (in 1907) and are (in 2008 and today) horrible "moral hazards".

Picture a busted gambler that walks out of a casino. He just lost his money, his car, his house, and his grandmother's money that was loaned to him.

As the gambler walks out of the casino "in a panic", JP Morgan (in 1907) and Ben Bernanke (in 2008) stuff the gambler's pockets with loads of money. They even stuff money into the gambler's mouth, just for good measure.

Morgan and Bernanke provide a "bailout" to save the gambler's "system," and they send him right back into the casino. The media declare Morgan and Bernanke to be hero's; at least until enough time passes, and the gambler inevitably comes out again with empty pockets and "in a panic".

Here's one more way to think of bailouts. Ten years ago, Blockbuster Video had 9,000 locations. In the marketplace, it doesn't matter how many locations you have. If you can no longer operate profitably, you're toast. Resources are removed from your hands are transferred to those who are succeeding at satisfying the most urgent desires of consumers.

By early 2014, the last of the 9,000 Blockbuster stores will be closed. No "panics". No "systemic crisis". In fact, most people won't even be aware of it. It's just the market doing its thing, as usual, without much fanfare.

How crazy would it be for the taxpaying public to keep those 9,000 stores open? Americans would (I think) rise up in hysterics if someone (like Krugman) came up with an idea for a Blockbuster TARP.

Blockbuster also does not have a rent-seeking cartel, like the banks do. If they did, who knows...perhaps Blockbuster would be able to keep its "video rental system" going at everyone else's expense.

We have just defined the prime reason for existence of The Federal make sure that the major banks never go under. The Fed is there to create as many paper dollars and electronic digits as possible (and at the expense of every individual in the world) to make sure that these "elite" individuals never have to close up shop.

Bernanke, during his "all-star conference" sings a different tune about the problems that face us. Both in 1907 and 2008, there weren't enough "regulations" on the system:
"Also interesting is that the 1907 panic involved institutions--the trust companies--that faced relatively less regulation, which probably contributed to their rapid growth in the years leading up to the panic. In analogous fashion, in the recent crisis, much of the panic occurred outside the perimeter of traditional bank regulation, in the so-called shadow banking sector."

The Mercatus Center reports: "According to the Code of Federal Regulation, more than 47,000 regulations apply to the financial sector..."

Apparently, according to Bernanke, 47 thousand regulations weren't enough. Perhaps 48,000 would do the trick? In essence, Bernanke is saying 'get off our back' and tries to deflect the issue. The easiest go-to excuse that every bureaucrat falls back on is "we need more regulations."

Here's the bottom line on the Panics of 1907 and 2008. It's something that was not said at the "all-star conference" and will never be said in any conference in Washington DC.

The Panic of 1907 was the excuse, or the catalyst, that was used to push for the establishment of the Federal Reserve. The bankers would not risk having to rely on one man, like JP Morgan, to bail them out the next time around. The American public would provide the bailouts going forward (whether they like it or not). That can only be done with a central bank in complete control of the money supply.

Before pulling something so drastic over the American public, a huge propaganda campaign would be necessary. As EPJ readers know: Ideas rule the world.

In 1908, J.R. Duffield, Sec. of the Bankers Publishing Co. said: “It is recognized generally that before legislation can be had there must be an educational campaign carried on, first among the bankers, and later among commercial organizations, and finally among the people as a whole.”

In other words, new ideas would have to permeate society before something so extravagant could ever be pulled off. It's also important to note that everyone wouldn't have to adopt the new ideas, only a critical mass, only enough.

Here's yet another key takeaway from the Panic of 1907. During financial panics, people are more open to new ideas. It's a time that they actually search for answers. A mere 6 years after the Panic of 1907, the banker's dream became a reality. They won that battle of ideas.

Here we are in 2013, and everyone knows (even the bankers themselves) that another crisis, or even multiple crises, are just around the corner. Fortunately, the American public, that has been ripped off for 100 years, have tools at their disposal that never existed before: instant communication with just about anyone in the world, and a universe of knowledge.

Millions around the world have also heard the idea of End of The Fed:

Thanks to the real hero, the ability for bankers to hide in the shadows is no more. They must now win the battle of ideas with a decentralized Internet. As you read this, entire works by Murray Rothbard, and Ludwig Von Mises are zipping electronically across the Earth at the speed of light. Ron Paul also has The Ron Paul Channel and Institute for Peace & Prosperity, and

While the bankers live and thrive on idolatry and the centralization of power, Liberty has no such apparatus. The message of liberty is not Ron Paul. He said so himself a thousand times 'People are not so much attracted to me as they are the message.' That message is criss-crossing the Earth, totally decentralized, every second of the day.

It's the power of ideas...doing their thing (as usual) and without much fanfare at all.

For sure, the opposition has an army of propagandists both in the centralized mainstream media, as well as on the Internet. We all know who they are. Remember, they can pay for and finance whatever they want. There are no checks.

You, dear reader, are a part of this battle of ideas. Like myself, you are a single node in the vast network of human interactions and communications. We don't have a choice but to be a part of it. The choice that we do have is whether we stay dark (and to ourselves) or light up and share the information that we've learned.

A critical mass of people must understand the principles of free markets and sound money. The bankers won the battle of ideas, and imposed the exact opposite, in 1913.

We can win the battle of ideas come 20-- if enough people learn the principles of liberty and (just as importantly) share their newfound knowledge.

Follow @ChrisRossini on Twitter


  1. That undeniable fact that no anti-Austrian EVER demonstrates the slightest familiarity with even basic Austrian concepts demonstrates that they are deathly afraid of even THINKING ABOUT what we are saying. The debate is over and we've won.

    1. Yup. Now you have to convince the 40IQ masses in the world that we won. Most are too stupid or ignorant to even see that.

    2. I suggest the starting point is getting most people to understand that inflation is a purposeful government program and not a mysterious force of nature. Nothing big can happen unless and until that small detail happens.

    3. Mike you know so you're the educator. Educate already.

  2. Isn't it sad how we are ruled by a small mafia?

  3. Great article! Keep writing more of these!

  4. Great history Chris, thanks! Is this re-posted w/

  5. It's re-posted on my Twitter and Facebook feeds.